Things You should Know Before Buying a Life Insurance

2025-07-15

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Thanks to online services, buying a life insurance policy is now as easy and convenient as buying new clothes. That said, there is a little more a lot more to consider when it comes to life insurance. It is a contract between you and the insurance provider that you will pay regular premiums, and the beneficiaries will receive a lump sum in your absence. Life insurance is a great way of financially protecting your loved ones upon your demise.

Naturally, there are multiple things to consider when buying life insurance. As you proceed with the purchase, some mistakes and ignorance must be avoided.

Key Takeaways

Understand your unique insurance needs based on lifestyle, dependents, and liabilities.
Always compare plans and providers before making a purchase.
Be truthful and accurate while filling out the application form to avoid claim rejection.
Choose the right coverage—not too much, not too little—to match your goals.
Enhance protection for suitable riders, such as accident or critical illness coverage.

Mistakes to Avoid When Buying Life Insurance

The objective of this investment is financial safeguarding for those you love and those who depend on you. For whatever reason, if the beneficiaries do not receive the sum, the investment loses its value. Here are the mistakes you must avoid when selecting a life insurance policy:

1. Not Understanding Your Insurance Needs

Not leaving sufficient financial assistance for your dependent is a big mistake. Here, age is not the only important factor. Not everyone leads their life the same way, and not everyone’s financial liabilities are the same. Financial goals also differ from one person to another.

When choosing life insurance, if all these parameters are not considered, the dependent will not have the required sum. You must take into account the financial needs of the dependent and any outstanding financial obligations, like loans, that you leave behind. Children’s education, marriage, the retirement of your spouse, and other similar expenses also require proper consideration. Ideally, the life insurance policy you opt for should accurately help the dependent.

2. Not Doing Enough Research

Going blind is a big no when it comes to a financial commitment like life insurance. Suppose you do not know about the claim settlement ratio of the insurance provider, its customer care service, and its flexibility in personalising policies and coverage. In that case, you will not be making the best decision.

The provider should be reliable when you are purchasing life insurance and continue to provide dependable service to your beneficiaries. Do a thorough research. Evaluate the past record and current status of claim settlement. Proceed when you have all the information and transparency.

3. Not Comparing Policies

Even a quick online search will show you how many different types of life insurance policies now exist in the market. The numerous options are the result of the diverse needs of individuals. There are endowment plans, term insurance plans, unit-linked insurance plans, policies offering regular income, and more. All these plans are designed with unique features and benefits.

When the market offers such an array of options and features, not comparing policies is a mistake. Without a thorough comparison of the policies, their benefits, and premiums, you might just end up with a good plan instead of the best plan for you and your loved ones.

4. Submitting False Information

Providing false information when buying your life insurance policies can cost you.. Insurance providers assess the risk and evaluate the premium based on the information you provide to them. If you provide incorrect information or withhold material facts, the insurer may cancel the policy or repudiate a claim in line with policy terms and applicable law (e.g., Section 45 timelines). Always disclose health, lifestyle, and occupation truthfully.

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5. Buying Too Little or Too Much Coverage

Suppose you purchase a life insurance policy that does not provide the beneficiaries with adequate funds, leaving them financially unprotected. Now, imagine getting life insurance with a much bigger coverage than the beneficiaries need. You will end up paying costly premiums for no reason.

The key here is to find the perfect coverage. There are different ways to choose the correct coverage. Consider your current financial liabilities, replacement needs of income, and future obligations to determine the correct coverage. A common rule of thumb is 10–15× annual income, but adjust for liabilities, dependents’ needs, existing assets, and inflation.

6. Not Considering Riders or Additional Covers

You can add riders or additional coverage to the standard life insurance policies to enhance the overall benefits. These riders provide many extra benefits along with the existing policy. It can be riders or covers for accidental death, disability cover, terminal illness, and more.

These riders each come with an additional cost and add up to the premium, increasing the total cost. However, the benefits will increase as well. Overall, you can widen the coverage more cost-effectively than opting for other types of protection plans.

Did You Know?

The origins of modern insurance can be found in the London Fire of 1666. Due to the severity of the fires, insurance became essential rather than optional.

Source: Investopedia

Explore Suitable Life Insurance Plans with Canara HSBC Life Insurance

You can review online term, savings, ULIP, child, and group plans from Canara HSBC Life Insurance, compare features, and check premiums. Customise coverage with eligible riders as per product terms, or contact an advisor for assistance.

Life Insurance - Top Selling Plans

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Coverage for spouse
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Glossary

Sum Insured: Sum insured is the maximum cap on the costs you are covered for in a year against any unfortunate event. It is applicable to non-life insurance policies like home and health insurance.
Sum Assured: Sum assured is the amount the life insurance company pays to the nominee if the insured event happens (death of insured). This term is used in life insurance policies.
Maturity Value: The amount of money paid out when a life insurance policy matures is known as its maturity value.
Risk Transfer: Risk transfer is a strategic method where a pure risk can be contractually shifted from one party to another as part of risk management and control.

FAQs Related to Insurance Policy

It is up to your requirements. Term life insurance is inexpensive and offers coverage for a specific number of years. On the contrary, whole life insurance has a savings aspect and covers the entire lifetime. Consider your financial objectives to make the right decision.

It depends on the policy. Some allow adding riders or changing options subject to terms, timing, underwriting, and charges. Switching to a new policy later can be costlier due to age/health.

Lowest premium isn’t always best—ensure the policy meets required coverage, features, and claim conditions while remaining affordable.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.