Lack of awareness is still the biggest stumbling block in insurance adoption in India, and around 47.6 per cent of Indians remain unaware of term insurance and its benefits, a new report has shown. Term insurance has grown by 18 per cent in FY24 across the industry as compared to a CAGR of just 2 per cent over the past five years, reveals the report by Policybazaar, titled ‘How India Buys Insurance 2.0’.

The survey found that 56 per cent of respondents who are aware of term insurance have a positive attitude toward purchasing it. The report is based on a survey of 3,955 respondents across 27 metros, Tier-2, and Tier-3 cities in India.

Health insurance

Indians continue to favour 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, 28.3 per cent of respondents ranked health insurance above equities, mutual funds, and government bonds.

Despite the increasing importance of health insurance, a significant number of policyholders remain underinsured. The report points out that a staggering 75 per cent of health insurance buyers in India have coverage of ₹10 lakh or less. The issue is most pronounced in South India, where 66 per cent of policyholders have coverage of ₹5 lakh or less.

Lack of awareness

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.

Non-buyers also reflect a severe underestimation of medical costs. Over half of respondents believe that critical illness treatments, such as cancer, kidney transplants, or cardiac procedures, cost less than ₹5 lakh, which is far from reality.

Notably, experts tend to 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 per cent of non-buyers accurately estimate their insurance needs in line with expert recommendations.

Sarbvir Singh, Joint Group CEO, PB Fintech said, “This year’s report puts a spotlight on the awareness gap even more evidently than before. A large proportion of consumers plan to sell ancestral assets or borrow money during a crisis rather than opt for simple, accessible solutions like health and life insurance to protect their families. As an industry, it’s imperative that we strengthen awareness and improve the overall customer experience to drive broader adoption and ensure financial security for all.”

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