Most Indians buy insurance once—and truly understand it only when a claim is rejected. Advertising focuses on cheap premiums, celebrities, and large numbers, while real problems lie hidden in fine print, definitions, and claim-time interpretation. Over multiple Term Insurance and Health Insurance masterclasses, claims discussions, and real-life disputes, one truth became clear:
Insurance failure is rarely about buying a policy. It is about buying the wrong policy, in the wrong way.
This guide is written using the entire learning from those sessions, including:
- Expert explanations
- Real claim rejection stories
- Practical mistakes people make
- Hidden clauses insurers rely on
- IRDAI-regulated realities
It is intentionally detailed, because insurance is a once-in-a-decade decision with lifelong consequences.
PART A — TERM (LIFE) INSURANCE#
1. What life insurance actually protects#
Life insurance is not about death—it is about income continuity. When a breadwinner is no longer around, the family does not lose emotions alone; it loses:
- Monthly income
- Loan repayment capacity
- Long-term financial stability
A correct life insurance policy ensures:
- Home loans do not become a burden
- Children’s education is uninterrupted
- Spouse does not face financial dependency
- Parents are not left vulnerable
You are not planning for death. You are protecting the life you are building today.
2. Types of life insurance — what to avoid and why#
❌ Endowment policies#
Endowment policies promise “guaranteed returns” but combine insurance and savings in the most inefficient way:
- Very low life cover
- Poor returns compared to even basic investments
- High commissions baked into premiums
❌ ULIPs#
ULIPs mix insurance with market-linked investments:
- Complex structures
- High charges in early years
- Lock-in periods
- Difficult to evaluate real returns
✅ Term insurance (the only rational choice)#
Term insurance is pure protection:
- No savings component
- No maturity benefit
- Maximum life cover at lowest cost
Golden rule: Never mix insurance with investment.
3. How much term cover do you actually need?#
The most practical rule discussed repeatedly:
Term Cover = 20–25 × Annual Income
Example:
- Annual income ₹10 lakh → Term cover ₹2–2.5 crore
Why this range matters:
- Accounts for inflation
- Covers long-term dependents
- Provides buffer for emergencies
Avoid under-insuring simply to save premium.
4. Policy duration — a commonly ignored mistake#
Many people buy term plans till age 50 or 55 to reduce premium. This is a mistake.
- Minimum recommended cover: till 60–65 years
- Extend to 70 if dependents rely longer
Insurance should last until your financial responsibilities end, not when premium feels uncomfortable.
5. Riders — useful vs unnecessary#
Reasonable rider#
- Accidental death benefit (optional, limited value)
Riders to generally avoid#
- Return of premium (ROP)
- Income riders
- Market-linked riders
These inflate premiums without proportionate benefit.
6. Claim settlement — the uncomfortable truth#
High claim settlement ratios advertised by insurers do not reflect ease of claim. From session experience:
- Most rejections arise from non-disclosure
- Insurers rely on definitions and medical history
Rule: Disclose every medical detail, even if it feels minor or old.
PART B — HEALTH INSURANCE#
7. Why buying health insurance early changes everything#
Health insurance punishes delay.
Buying early ensures:
- Lower premiums
- Minimal exclusions
- Waiting periods finish while you are healthy
- Lifetime renewability without restrictions
Corporate insurance alone is a temporary safety net, not long-term protection.
8. Waiting periods — the backbone of health insurance#
Every policy has three layers of waiting periods:
- Initial 30 days – only accidents covered
- 2 years – specific listed illnesses (hernia, cataract, stones, knee replacement)
- 3 years – pre-existing diseases (BP, diabetes, thyroid, cholesterol)
Buying early ensures these periods pass before risk increases.
9. Corporate vs retail health insurance — the vehicle analogy#
Corporate policy (two-wheeler)#
- Useful for short-term use
- Ends when employment ends
- Heavy sub-limits
- Weak in critical illness
Retail policy (four-wheeler)#
- Lifetime protection
- Better features
- Greater claim stability
Use both, but never rely only on corporate cover.
10. The three clauses that silently destroy claims#
❌ Co-payment#
Even 10–20% co-pay can mean lakhs from your pocket during hospitalization.
❌ Room rent restriction#
Triggers proportionate deduction across the entire bill—not just room charges.
❌ Disease-wise sub-limits#
Large cover advertised, tiny payouts during real illness.
These three clauses should be avoided at all costs.
11. Features that actually protect you#
No-claim bonus (NCB)#
Automatically increases coverage every claim-free year.
Unlimited restoration#
Refills sum insured repeatedly, including for the same illness, without delay.
Pre & post-hospitalisation#
Covers tests, medicines, physiotherapy beyond hospital walls.
Daycare coverage#
Essential for modern treatments that don’t require 24-hour admission.
12. Daycare vs OPD — a critical distinction#
- OPD = routine doctor visits (usually excluded)
- Daycare = advanced procedures under 24 hours (must be covered)
13. Parents’ health insurance — where most mistakes happen#
Key realities:
- Parents usually have BP, diabetes, cholesterol
- These fall under 3-year PED waiting period
- Major illnesses are often linked to these conditions
Guidelines:
- Disclose everything
- Choose separate policy for parents
- Above 65, ₹5–10 lakh cover may be realistic
14. Family floater vs individual policies#
- Self + spouse + children → family floater
- Parents → separate
- Similar-age parents → floater can work
Unlimited restoration makes floaters safer than before.
15. Maternity insurance — why it rarely makes sense#
Private maternity add-ons:
- High premium
- Low caps (₹25k–₹50k)
- Long waiting periods
- ICU complications still capped
Better strategies:
- Use corporate maternity benefits
- Save separately via SIP
16. Choosing the right insurer — ignore marketing#
Misleading claims:
- “97% cashless approval”
- “₹237/month premium”
What actually matters:
- IRDAI 3-year claim data
- Complaint ratios
- Hospital network near home
17. Claim stories — why expertise matters#
Case 1: Child’s thyroid cyst#
Claim rejected using wordplay. Escalated legally. Settled before court hearing.
Case 2: Parent’s ₹4 lakh claim#
Rejected on fine print. Fought for 1.5 years. Claim overturned.
These cases show insurers test how far customers will push.
18. Why claims get rejected most often#
- Non-disclosure
- Claim during waiting period
- Late intimation (>30 days)
- Policy lapse
- Sub-limit violations
19. Moratorium period — your strongest legal shield#
After 5 continuous years, insurers cannot reject claims except for fraud or exclusions.
Continuity is power.
20. Multi-year policies — a smart optimisation#
2–3 year policies:
- Offer discounts
- Lock premiums
- Prevent lapse
- Speed moratorium protection
FINAL CHECKLIST#
Term insurance#
- 20–25× income
- Pure term plan
- Full disclosure
- Adequate duration
Health insurance#
- No co-pay
- No room rent cap
- No disease sub-limits
- Unlimited restoration
- Strong hospital network
- Separate parents’ cover
Final word#
Insurance should work silently—you only notice it when disaster strikes. Spend time choosing correctly now, so your family never has to fight later.