Common insurance myths people still believe — from claim rejections to GST — debunked with facts, so you can insure smarter in 2026.
- “Insurance is a waste of money if you don’t claim” — wrong. It’s protection, not an investment; no claim means no loss happened.
- “Young, healthy people don’t need insurance” — premiums are cheapest when you’re young; waiting only makes cover more expensive or harder to get.
- “Employer health cover is enough” — group cover usually ends with your job and often has lower limits than you think.
- “Claims always get rejected” — most rejections trace back to non-disclosure or documentation gaps, not insurer bad faith.
- Good news: since September 2025, individual life and health insurance premiums in India are GST-free (the old 18% levy has been removed) — one real cost objection is now gone.
Insurance myths cost Indian households real money every year — either through being underinsured or by avoiding cover altogether over fears that turn out to be false. Despite growing awareness, insurance myths people still believe today shape how they buy (or don’t buy) life, health, and asset cover.
Some of these myths were partly true a decade ago and have simply stuck around. Others were never true, just repeated often enough to sound like fact. This post breaks down the most common ones and what’s actually true today.
Myth 1: “Insurance Is a Waste of Money If I Never Claim”
This is the most damaging myth because it discourages people from buying cover at all.
The truth: Insurance is risk protection, not a savings product (with the exception of endowment or ULIP plans). A term or health insurance policy exists so that if something goes wrong, you’re not financially wiped out. Not claiming means nothing bad happened — that’s the outcome you wanted.
If you want your premium to “come back,” that’s a different product category (like endowment plans or return-of-premium term plans), not a reason to skip pure protection cover.
Myth 2: “I’m Young and Healthy, I Don’t Need Insurance Yet”
The truth: This is exactly backwards. Life and health insurance premiums are priced on your age and health at the time of purchase — the younger and healthier you are, the cheaper and easier it is to get covered.
Waiting until your 40s means:
- Higher premiums for the same sum assured
- A higher chance of pre-existing conditions triggering exclusions or loading
- Possible outright rejection for certain covers
The Right Time to Buy
Financial advisors generally recommend buying term life insurance as soon as you have dependents or liabilities (like a home loan), and health insurance as early as your first job — even before you think you “need” it.
Myth 3: “My Employer’s Health Insurance Is Enough”
The truth: Group Health insurance from your employer is a good starting point, not a complete solution.
- Cover typically ends the day you leave the job — during a job change or layoff, you could be uninsured for weeks or months.
- Sum insured is often standardised (e.g., ₹3–5 lakh) and may not scale with your family’s actual medical inflation-adjusted needs.
- Pre-existing disease waiting periods reset if you switch policies later without portability.
A personal health insurance policy, even a smaller top-up plan alongside employer cover, protects you against these gaps.
Myth 4: “Insurance Claims Always Get Rejected”
The truth: Most claim rejections aren’t random — they trace back to specific, avoidable issues:
- Non-disclosure of pre-existing conditions or lifestyle habits (like smoking) at the time of purchase
- Claiming for something explicitly excluded in the policy wording
- Missing or incomplete documentation
- Claiming after the free-look or waiting period restrictions
Choosing an insurer with a strong claim settlement ratio and being fully honest on your proposal form dramatically reduces rejection risk.
Myth 5: “Term Insurance Is a Loss If I Survive the Policy Term”
The truth: Term insurance is pure protection — you’re paying for financial security for your dependents, not for a guaranteed payout. Comparing it to a “loss” is like calling a fire extinguisher a waste of money because your house never burned down.
If you specifically want your money back, return-of-premium term plans exist, but they cost significantly more and usually offer lower coverage per rupee spent.
Myth 6: “Insurance Premiums Are Expensive Because of Tax”
This one used to be partly true — but it’s now outdated.
The truth: As of September 22, 2025, the Indian government exempted individual life and health insurance premiums (including term, ULIP, endowment, family floater, and senior citizen health plans) from the 18% GST that was previously charged. So this particular cost objection no longer applies the way it used to — premiums are now generally lower than they were a year ago.
Myth 7: “One Big Health Policy Covers Everything”
The truth: Standard health insurance policies often exclude or cap coverage for things like maternity, OPD consultations, dental, or specific critical illnesses unless you add riders or buy separate covers. Always read the policy wordings and exclusions list, not just the sum insured number.
FAQs on Insurance Myths
- Is it true that insurance companies avoid paying claims?
No. Insurers are regulated by IRDAI and have strong incentives (including public claim settlement ratio disclosures) to pay valid claims. Most rejections stem from non-disclosure or documentation issues, not intent to avoid payment.
- Does buying more than one health insurance policy help?
Yes — you can claim across multiple policies (up to the total treatment cost) as long as you disclose all policies to each insurer at claim time.
- Is life insurance necessary if I have no dependents?
It’s less urgent, but buying early still locks in lower premiums for when you do have dependents, especially since health changes can affect future eligibility.
- Do pre-existing diseases mean I can never get health insurance?
No. Most insurers cover pre-existing conditions after a waiting period (typically 2–4 years), and some plans offer immediate cover at a higher premium.
Conclusion
Insurance myths persist because they sound intuitive — but they often lead to the exact outcome insurance is meant to prevent: being unprotected when it matters most. Once you separate outdated assumptions from current facts (like the GST exemption or how claim settlement actually works), buying the right cover becomes a much simpler decision.
Take five minutes today to review your existing life and health policies against what you’ve just read — and if you’re relying only on employer cover or have been putting off buying a policy “for later,” that’s the gap worth closing first.