Mistake: Buying Too Little Cover

Ask most Indian policyholders how they chose their sum insured and the answer is usually some version of: "It was what the agent suggested" or "It is what my company offered." Very rarely does someone say they calculated what their family would genuinely need. The result is a country that is structurally underinsured — paying premiums for policies that would not survive contact with a real emergency.

The Underinsurance Problem in Numbers

India's life insurance protection gap — the difference between the cover people hold and what they actually need — runs into many tens of lakh crore rupees. For health insurance, the average sum insured held by Indian families is far below the cost of a serious illness in a tier-1 private hospital. Many families hold health cover of ₹2–3 lakh in a market where a single cardiac procedure routinely costs ₹4–8 lakh.

Calculating the Right Life Cover

The Human Life Value (HLV) method is the most reliable starting point. Multiply your net annual income by the number of years until retirement, add your outstanding loans and liabilities, add an estimate of your children's future education costs, then subtract your existing savings and investments. Most working Indians in the 30–50 age bracket should carry life cover of ₹1–3 crore or more — far beyond the ₹10–25 lakh policies that were commonly sold a decade ago.

Calculating the Right Health Cover

At minimum, a family in a tier-1 or tier-2 city should carry total health cover of ₹10–15 lakh per year. Senior parents need separate cover, ideally ₹10–25 lakh per parent, given higher hospitalisation frequency and the growing cost of age-related conditions. A super top-up plan above a deductible threshold can extend this affordably.

The "Top-Up After a Claim" Illusion

Many people plan to "increase cover if something happens." This is not possible in the way they imagine. After a major claim, or after developing a new condition, the insurer may refuse to increase the sum insured, impose a loading, or exclude the newly discovered condition. The time to buy the right cover is before anything happens, not after.

Inflation Erodes Cover Over Time

A ₹5 lakh health policy bought in 2010 may have felt generous then. In 2025, with medical inflation compounding at over 10% annually, the same policy is worth far less in real terms. Review your sum insured at every renewal and increase it if your premium-to-cover ratio has fallen significantly behind market rates.

The Restoration and No-Claim Bonus Features

Look for health plans that offer an automatic restoration of the sum insured after a claim, and a no-claim bonus that compounds your cover year on year. These features help fight underinsurance without requiring you to buy a new policy every time your needs grow.

Conclusion

Buying the right amount of cover is more important than buying the cheapest premium. Take time to properly size your protection needs for both life and health, and compare plans that offer growth features so your cover keeps pace with your life. A guided review on TruePolicy can show you exactly where your current cover falls short.