Underinsured? 75% in India have health policies below Rs 10 lakh cover

Despite the increasing importance of health insurance, at least 75% of health insurance buyers in India have coverage of Rs 10 lakh or less, as per a study by Policybazaar. The issue is most pronounced in South India, where 66% of policyholders have coverage of Rs 5 lakh or less. 

 

Policybazaar.com, an online insurance marketplace, has unveiled the 2nd  edition of its report, "How India Buys Insurance 2.0,", which uncovers several key insights, including the fact that Indians continue to severely underestimate healthcare costs—nearly 48% of policyholders opt for coverage of Rs 5 lakh or less. At the same time, 47.6% of Indians remain unaware of term insurance and its benefits. 

 

Moreover, Indians continue to favor traditional financial investments such as gold, fixed deposits, insurance-linked savings schemes, and real estate. However, health insurance has now joined this list. According to the survey, only 28.3% of respondents ranked health insurance above equities, mutual funds, and government bonds.    

 

Non-buyers also display a severe underestimation of medical costs. About 51% of them believe that critical illness treatments, such as cancer, kidney transplants, or cardiac procedures, cost less than Rs 5 lakh – which is far from the ground reality today.

 

The awareness gap remains one of the biggest barriers to term insurance adoption in India. The survey found that 47.6% of Indians are unaware of term insurance and its benefits.  

 

Industry-wide, term insurance grew 18% in FY24, compared to a CAGR of just 2% over the past five years. The survey found that 56% of respondents who are aware of term insurance have a positive attitude toward purchasing it.

 

A key issue in term insurance adoption is not just a lack of awareness but also a limited understanding of personal finance. Many non-buyers fail to consider key financial factors such as child education, marriage, loan obligations, spousal retirement, and medical contingencies when evaluating their family's long-term needs. 

 

Experts recommend a life insurance cover of 15-20 times one’s annual income to ensure that dependents can sustain themselves for at least 10 years. Only 13% of non-buyers accurately estimate their insurance needs in line with expert recommendations.