Nearly 50% of health insurance policyholders in India are underinsured, opting for coverage of Rs5 lakh ($5,856) or less, a recent report by Policybazaar has revealed. This selection leaves them vulnerable to the high costs of medical treatments, which often exceed this amount.
The findings, part of the second edition of the How India Buys Insurance 2.0 report, indicate that 66% of health insurance policyholders in South India fall into this underinsured category. Furthermore, the report highlights a widespread misconception, with 51% of non-policyholders mistakenly believing that critical illness treatments cost less than Rs5 lakh.
Despite health insurance becoming one of the top three financial products for 28.3% of respondents, outpacing equities, mutual funds, and government bonds, traditional investments like gold, fixed deposits, and real estate continue to dominate the preferences of Indian consumers.
In addition to health insurance, the report also draws attention to the lack of awareness surrounding term insurance, with 47.6% of Indians unaware of its existence and benefits. However, the adoption of term insurance has seen an 18% growth in fiscal year 2024, a sharp increase compared to the 2% compound annual growth rate (CAGR) observed over the past five years.
Of those aware of term insurance, 56% are inclined to consider purchasing it. Still, a significant gap remains in understanding family financial needs. The survey found that 87% of individuals who do not purchase term insurance underestimate the level of financial support their families would require in their absence. Only 13% of non-buyers follow expert recommendations, which advise life insurance coverage to be 15 to 20 times an individual’s annual income.
Sarbvir Singh, Joint Group CEO of PB Fintech, emphasized that the report underscores the ongoing lack of consumer awareness in India. He added that many people continue to rely on selling family assets or borrowing money during financial crises, rather than utilizing insurance products designed to safeguard their families.
($1.00 = Rs85.40)
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