What to Check Before Buying Insurance — A Pre-Purchase Checklist

Most insurance mis-selling in India doesn't happen because the product is bad — it happens because the buyer never asked the right questions before signing. This checklist covers what actually matters before you commit.

1. Work Out the Cover Amount First — Not the Premium

The single most common mistake: choosing a policy based on what premium feels affordable, rather than starting from how much cover your family would actually need. Work backward from real numbers — outstanding home loan, children's education costs, years of household expenses your family would need to replace, minus existing savings and investments. Only after that number exists should premium affordability enter the conversation.

2. Term Insurance vs Investment-cum-Insurance — Know the Difference First

Pure term insurance gives maximum cover for the lowest premium, with no maturity payout if you survive the term. ULIPs and endowment plans mix insurance with investment, and typically give far less life cover per rupee of premium. For pure protection, term insurance is almost always the more efficient starting point — investment goals are usually better served separately, through mutual funds or PPF.

3. Check the Claim Settlement Ratio — Properly

IRDAI publishes claim settlement ratio data annually for every insurer. Two things matter beyond the headline number:

• Ratio by number of claims vs. by amount — an insurer can have a high count-based ratio while rejecting a disproportionate share of large claims. Check both where available.
• Recency — look at the last 2-3 years' data, not a single good year.

4. Read the Exclusions Before You Read the Benefits

Every policy brochure leads with benefits. The exclusions section — usually smaller print, later in the document — is where claims actually get rejected. Common exclusion areas to specifically check: waiting periods for pre-existing conditions (health insurance), suicide clause duration (life insurance, typically the first policy year), and any activity-based exclusions if you have hobbies like adventure sports.

5. Understand the Riders You're Being Sold

Riders (critical illness, accidental death, waiver of premium) add real value in some cases but are also where a lot of unnecessary premium gets added. Ask specifically: what does this rider cover that the base policy doesn't, and what's its incremental cost as a percentage of the base premium? If an agent can't answer that clearly, that's itself a signal.

6. Disclose Fully — Every Time

Non-disclosure (a pre-existing condition, smoking status, family medical history) is the single biggest reason claims get rejected years later. It's tempting to under-disclose to get a lower premium quote, but under Section 45 of the Insurance Act, insurers can investigate and reject claims for non-disclosure discovered even years into the policy, outside a limited contestability window. Full disclosure at purchase is cheaper than a rejected claim later.

7. Check Premium Payment Flexibility and Lock-in

Understand whether premiums are level for the full term or can be revised, what happens if you miss a payment (grace period, policy lapse rules, revival window), and whether there's a lock-in before you can surrender without heavy loss.

8. Ask About the Free-Look Period

Every policy comes with a free-look period (commonly 15-30 days) during which you can return the policy for a full refund if the terms don't match what was explained to you at sale. Read the actual policy document during this window — not just the sales brochure.

A Simple Pre-Purchase Checklist