Are You at Risk? How Half of Indians Are Choosing Inadequate Health Coverage and Facing Financial Strain

Many people underestimate the costs associated with critical illness treatments.

A recent report by Policybazaar reveals that nearly half of those with health insurance have coverage of $5,856 (about Rs5 lakh) or less. This means many might not be fully prepared for the actual medical expenses they could face. In South India, this trend is even more pronounced, with 66% of policyholders having similar limits on their coverage.

Interestingly, 51% of individuals without health insurance also mistakenly believe that critical illness treatments are typically under Rs5 lakh. This misperception highlights a wider lack of awareness about health-related financial products.

Health insurance has become one of the top three financial products for 28.3% of respondents, ranking above investments like equities and mutual funds. However, traditional options like gold and real estate still attract a larger share of people’s investment focus.

Despite the growing interest in health products, many people remain in the dark about term insurance. The report indicates that 47.6% of respondents are unaware of term insurance and its benefits. However, the industry is seeing a shift: term insurance adoption grew by 18% in fiscal year 2024, a significant increase compared to the previous five years, which averaged just 2% growth annually.

Among those who know about term insurance, 56% show a willingness to buy it, but a gap exists in understanding actual financial needs. The survey revealed that 87% of those not buying term insurance underestimate the level of financial support their families would need in case of their absence. Only 13% align their insurance needs with expert advice, which typically suggests having coverage amounting to 15 to 20 times an individual’s annual income.

Sarbvir Singh, Joint Group CEO of PB Fintech, emphasized the importance of awareness. He pointed out that many people still prioritize selling ancestral assets or borrowing money during emergencies over utilizing insurance products to safeguard their families.

This disconnect between perception and reality can be detrimental. A growing number of families face unexpected medical costs that far exceed their coverage. As health expenses continue to rise, having adequate insurance becomes crucial not just for individual peace of mind, but for the financial security of families overall.

According to a study by the Insurance Regulatory and Development Authority of India (IRDAI), the average healthcare cost in urban areas has increased by 15% over the past three years. Thus, recognizing the importance of suitable insurance coverage could greatly mitigate future financial stress for families.

In summary, as awareness increases, policyholders and potential buyers must better understand their health insurance needs to truly protect themselves and their loved ones.

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