Fortune India has reported on a gap in India's insurance debate. It calls the gap misbuying, which means buyers pick a policy that doesn't fit their needs.
Most talk focuses on mis-selling, where a seller pushes the wrong product. Misbuying looks at the buyer's side too. For you, the message is simple. Know what you need before you sign anything.
Key takeaways
- Misbuying means choosing a policy that doesn't match your real need.
- It's different from mis-selling, where the seller pushes the wrong product.
- A wrong policy can leave your family underprotected for years.
- Check cover, cost and exit terms before you pay.
- Use the free-look period if you spot a mistake.
What is misbuying in insurance?
Insurance is a promise to pay when something goes wrong. Different policies solve different problems. Term insurance pays your family if you die. Health insurance pays hospital bills. Savings plans mix a little cover with investing.
Misbuying happens when the product and the need don't match. A young earner with a family may buy a small savings plan and think they're safe. Some people buy a policy because a friend did. Others buy only to save tax.
According to Fortune India's reporting, this buyer side of the problem is missing from the distribution debate. We only have the headline and its framing. So we explain the idea in general terms below.
How misbuying can cost you money
Here's an example with round, illustrative numbers. They aren't quotes from any insurer. Say a 30-year-old earner wants to protect a family. They pay ₹50,000 a year for a savings plan. Its life cover is only about ₹5 lakh.
A pure term plan could give ₹1 crore of cover for far less. The table shows how the two compare.
| Option | Yearly premium (example) | Cover (example) | Main purpose |
|---|---|---|---|
| Term plan | ₹12,000 | ₹1 crore life cover | Protect family income |
| Savings plan | ₹50,000 | ₹5 lakh life cover | Save, plus small cover |
| Health plan | ₹15,000 | ₹10 lakh hospital cover | Pay medical bills |
In this example, the savings plan costs about four times more. Yet it gives one twentieth of the life cover. That gap is the cost of misbuying.
Savings plans aren't bad. They suit some goals. The trouble starts when you buy one for the wrong reason.
Who is affected?
First-time buyers are the most exposed. So are young families and people who buy under time pressure. Anyone who doesn't read the policy papers can also get caught.
Loans add another risk. Lenders sometimes offer insurance along with a loan. If you're taking a personal loan or a home loan, ask if the insurance is optional. Ask what it costs and what it actually covers.
What to do before you buy a policy
A few calm steps can save you years of regret. Try this checklist.
- List who depends on your income, such as parents, a spouse or children.
- Name your need first: family protection, hospital bills or savings.
- Compare cover, premium, waiting periods and exclusions (what the policy won't pay for).
- Read the policy document, not just the brochure.
- Ask what happens if you stop paying midway.
- Use the free-look period, usually 30 days after you get the policy, if something is wrong.
Insurers and sellers are regulated by IRDAI, India's insurance regulator. If a seller won't answer your questions clearly, walk away. For more explainers, visit our news hub.
Frequently asked questions
What is the difference between misbuying and mis-selling?
Mis-selling is when a seller pushes a product that doesn't suit you. Misbuying is when the buyer picks a product that doesn't match their need. Both can leave you underprotected.
Is a savings insurance plan always a bad choice?
No. It can suit people who want forced, long-term saving with some cover. It's a poor choice if it's your only life cover.
Can I cancel a policy I bought by mistake?
Yes, in the free-look period, which is usually 30 days after you receive the policy. Check your policy document for the exact days. After that, cancelling may cost you money.
BankCreds analysis
This debate matters less to you than the headline suggests. You can't change how the industry sells. You can change what you buy.
The rupee view
Take a family with one earner and a home loan EMI (the monthly loan payment) of ₹30,000. If the earner dies, the EMI doesn't stop. A ₹5 lakh cover pays about 16 months of EMIs. A ₹1 crore cover can clear the loan and still leave money for school and food. That gap decides whether the family keeps the home.
Don't over-read this story. It doesn't mean every savings plan is a bad buy. It also doesn't mean you should cancel yours today, because early exit can cost you money. This week, check your total life cover against your loans and your family's yearly costs. If you're short, add a term plan.
This section is BankCreds' own assessment of what the development means for Indian borrowers and savers. It is independent commentary, not part of the source reporting above.
Sources & references
- Fortune India — originating report https://www.fortuneindia.com/opinion/misbuying-the-missing-piece-in-indias-insurance-distribution-debate/169002
- IRDAI — Insurance regulator that oversees insurers, sellers and policyholder protection rules https://irdai.gov.in/
Source links are shown as plain text, not clickable links. Copy a URL into your browser to read the original report.
Editorial note & disclaimer
How this was reported. The development above is attributed to the source or sources listed. BankCreds does not independently verify a third party's reporting; where a figure or a regulatory position is stated as fact, it is either attributed or drawn from the regulator's own published material. Everything under "BankCreds analysis" is our own assessment.
Rates and figures. Interest rates, per-gram values and premium bands quoted here are indicative, move daily, and differ by borrower profile, city and lender policy. Confirm the final number with the institution before you act on it — the sanction letter or policy schedule governs, not a news report.
Not financial advice. This article is general information for an Indian audience. It is not investment, tax, credit or insurance advice, takes no account of your circumstances, and BankCreds is not a lender, broker, distributor or advisor. Consider speaking to a SEBI-registered investment adviser or a qualified professional before acting.
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