Insurance mis-selling can trap you! Follow these tips to ensure the right plan. Check coverage exclusions & inclusions | Mint

At a recent event in Mumbai, Union Finance Minister Nirmala Sitharaman flagged mis-selling of financial products, particularly related to insurance. Often, consumers buy an insurance product after being prodded by an agent, who could be a friend or a relative. After numerous calls, which culminate in a face-to-face meeting, you decide to buy an insurance policy assuming that you bought the ‘right’ policy because someone you trust had highly recommended it.

Eventually, you buy a plan believed to be the ‘best’ for you, but as it often turns out, it may not be the case. So, what is a good insurance product? This is quite an open-ended question. What is right for one person may not be right for the other, and vice versa.

At the outset, opting for an insurance product that aligns with your income is highly recommended. This means if your income is on the lower side, you can ideally settle for a term plan of moderate value. Alternatively, if your income is on the higher side, you need a bigger plan that can cover the needs and contingencies of your family.

For higher income bracket

When a policyholder’s income is, for instance, upward of ₹1 lakh, then your dependents would likely have an expectation of a comfortable lifestyle or premium education. As a result, you need to have a bigger term insurance plan to cover all these eventualities.

“Term insurance becomes increasingly crucial for high-income earners whose monthly income is more than ₹1 lakh as their financial liabilities and lifestyle expectations are usually greater. Their dependents may have higher expectations for premium education and maintaining a comfortable lifestyle. Adequate term insurance ensures that these goals are not compromised,” says Rhishabh Garg, Head, Term Insurance, Policybazaar.

“Someone who earns above ₹50 lakh per annum should buy a term plan of ₹5 crore, which is vital to ensure proper protection for their loved ones. The premium for such coverage is pretty affordable. You can secure a ₹5 crore cover for just ₹3,000 to 3,500 a month,” he adds.

Factor in the uncertainties

Another factor worth considering is that loans and other liabilities should be factored in while ascertaining the ideal term insurance cover. “It’s important that you don’t just consider your current disposable income but also factor in your outstanding liabilities like a house loan, business loan, etc. Many rely on liquid assets as a replacement for term insurance, but this can fall short, and it doesn’t account for future uncertainties and needs. Many insurers now offer cover up to ₹20 crores in term insurance plans,” says Garg.

Say no to misselling: Key tips to remember:

1. Research well: First, you must invest time in researching and comparing the plans available. “This can be done by examining different plans offered by different insurers, comparing premiums, coverage benefits, and other additional riders. This can help them find the right plan that fits their needs,” says Siddharth Singhal, Head of Health Insurance, Policybazaar.

2. Review thoroughly: Go through the policy document properly to understand the coverage you will get. You should also get a clear idea of the inclusions and exclusions of the coverage.

3. Waiting periods: Consumers should be aware of the waiting periods linked to the policy. “Typically, there’s a standard 30-day waiting period with almost all policies for general claims,” adds Singhal.

Besides, there are specific waiting periods for pre-existing conditions and specific treatments.