5 Insurance Policies You Probably Don’t Need – And One You Must Never Drop

Last Updated on April 21, 2026 by teamtfl

“Insurance is not about getting the best deal. It is about having the right cover at the right time – and letting go of what no longer serves you.”

A client walked into my office a few years ago carrying a folder thick enough to be mistaken for a legal brief. Inside: eleven insurance policies. Term plans, endowment policies, ULIPs, a money-back plan, two health policies, a personal accident rider, and something his banker had sold him as “a guaranteed savings plan with life cover.”

He was paying Rs 1.8 lakh per year in premiums. Of that, Rs 1.1 lakh – more than 60% – was going to policies he did not need, did not understand, or that were actively working against his retirement goals.

Eleven policies. And his family was actually underinsured on the things that mattered.

The Framework: How to Think About Any Insurance Decision

Two questions determine whether insurance is worth buying: what is the probability of the event occurring, and what is the financial impact if it does?

High probability, high financial impact (health emergencies, motor accidents): insure without question. Low probability, high financial impact (premature death when you have young dependents, critical illness): insure after evaluating your situation. High probability, low financial impact (phone screen cracks, extended warranties): self-fund. Low probability, low financial impact (credit card loss, flight delays): ignore entirely.

Most insurance mis-selling happens in the bottom two quadrants. Products are dressed up to appear high-impact when they are not. The premium flows to the seller. You get cover for something that was never a real financial threat.

“In 25 years of reviewing client portfolios, I have never met anyone underinsured on things that did not matter. But I regularly meet people paying thousands per year on wrong policies while being underinsured on term and health.”

– Hemant Beniwal, CFP, CTEP | Founder, RetireWise

Policy 1: Insurance Mixed With Investment

This is the single most pervasive insurance mistake in India – and it costs families crores over a lifetime.

ULIPs, endowment plans, money-back policies, guaranteed return plans with life cover – all mix insurance and investment in a way that does neither well. The insurance component is expensive: a pure term plan gives 5-10x more cover for the same or less premium. The investment component is expensive: fund charges, mortality charges, and premium allocation charges reduce your effective returns significantly versus a mutual fund.

The product is structured this way because it generates far higher commissions for the seller. Your banker recommends it because the branch has insurance sales targets. Your agent recommends it because the first-year commission runs 25-35%.

What to do: Buy a term plan for life cover. Invest in mutual funds for wealth creation. Keep them separate. If you have an existing endowment or ULIP, evaluate whether surrendering makes sense after accounting for surrender charges. Here is a guide to exiting mis-sold insurance policies.

Policy 2: Life Insurance on a Child’s Name

The purpose of life insurance is to replace income that dependents will lose if the insured person dies. A child has no income. There is nothing to replace.

Child insurance plans – marketed as “securing your child’s future” – are typically endowment or ULIP structures on the child’s name. They are a marketing construct, not a financial solution. If you want to secure your child’s future, insure your own life adequately and invest separately for their education goals.

What to do: Large enough term insurance on your life plus dedicated SIPs for your child’s goals is the correct structure. Nothing else is needed.

Policy 3: Life Insurance After Retirement

This is the retirement angle that most insurance discussions completely miss.

Life insurance protects your dependents from the financial loss of your income. Once you retire, there is no active income to replace. If your children are earning, your home loan is cleared, and your spouse has her own income or pension – life insurance after 60 is, for most people, serving no real financial purpose. You are paying premiums to leave a legacy, not to protect a livelihood.

The exception: if your spouse depends entirely on your pension (which stops when you pass), or if you have outstanding liabilities. In those cases, some cover is warranted. Otherwise, freeing up Rs 30,000-80,000 per year in premiums and redirecting that to your retirement corpus for another 5-7 years is a meaningful decision.

What to do: At age 55-60, review every life policy. For each one ask: whose income am I protecting, and does that person still depend on my income? If the answer is no, plan a systematic exit.

Policy 4: Accidental Death Rider When You Already Have Term

Accidental death insurance is largely redundant if you already have adequate term life insurance. Term insurance pays on death from any cause – accident, illness, or otherwise. Adding a separate accidental death policy means paying twice to protect against the same financial loss.

Where personal accident insurance adds genuine value: disability and income replacement cover. If an accident leaves you unable to work, term insurance does not pay because you are alive. A disability income rider or standalone personal accident policy covering loss of income from disability fills a real gap that is significantly underutilised in India.

What to do: If your personal accident policy covers only death and you have adequate term cover, it is likely redundant. If it covers disability and income replacement, it earns its premium.

Policy 5: Home Loan Protection Insurance Sold by Your Bank

When you take a home loan, your bank will almost certainly try to sell you a home loan protection plan – often presenting it as compulsory or strongly recommended. It is neither.

These plans are typically single-premium policies where cover reduces as your loan balance reduces. They are significantly more expensive than a plain term plan providing equivalent cover. They also lock you into the lender in a way that complicates refinancing to a better rate later.

The right solution: your existing term insurance (sized correctly) already covers your family’s ability to repay the home loan if you die. There is no need for a separate, expensive, loan-linked policy. More on why home loan protection insurance is usually a bad deal.

The One Insurance You Must Never Drop: Health

Everything above is about rationalising. This is about holding firm.

Health insurance becomes more expensive and harder to obtain after 60. Pre-existing conditions create waiting periods. Many insurers limit or decline cover above certain ages. The medical costs of ageing are significant and inflation-linked at 12-15% annually.

Buy comprehensive personal health insurance in your 40s. Maintain it continuously through retirement. Never depend solely on an employer group policy that stops the day you retire. Never lapse a health policy and try to restart it – the underwriting at re-entry is far more stringent than at original entry.

Read – Critical Illness Insurance: Why Your Health Insurance Is Not Enough

Read – How Much Health Insurance Do I Need in India?

Frequently Asked Questions

Should I surrender my LIC endowment policy?

It depends on how many years you have paid and how many remain. In the early years (under 5), surrender charges are high and the case for exiting is strongest. After 15+ years on a 20-year policy, you may be close enough to maturity that surrendering costs more than waiting. Always model the numbers for your specific policy rather than applying a general rule.

At what age should I stop paying for life insurance?

Once your retirement corpus can sustain your spouse without your income, and your children are financially independent, the primary purpose of life insurance is fulfilled. For most people this happens between 55 and 65. At that point, making policies paid-up or letting them lapse is usually the right approach.

Is health insurance still needed after retirement?

Always. Buy personal family floater health insurance in your 40s, keep it running through retirement, and review the sum insured every few years to keep pace with medical inflation running at 12-15% annually.

More insurance is not better insurance. The right insurance is. And in retirement, much of what you paid for in your 30s and 40s has done its job. Releasing those premiums and redirecting them – even for 5-7 years – adds meaningfully to your corpus.

Review, rationalise, redirect. That is the insurance strategy for retirement.