Why People in India Avoid Life Insurance: A Matter of Trust and Awareness

Life insurance is becoming increasingly popular and accessible, yet in India, many individuals still hesitate to purchase it. This reluctance can be attributed to several factors, including a lack of awareness and the fear of fraud. In this article, we delve into the reasons why people in India do not get life insurance and explore the role of affordability and trust in shaping this behavior.

The Role of Affordability in Purchasing Life Insurance

One major barrier to life insurance penetration in India is the affordability criteria. Most traditional term plans require a minimum income of 3-5 lacs (approximately $4,000-$6,000) annually. This eligibility criterion may seem stringent, but it highlights the need for insurance companies to offer plans that cater to a wider range of income levels. Unfortunately, many Indians struggle to meet these thresholds, leading to a significant portion of the population remaining uninsured.

Traditional vs. Term Plans: Understanding the Lack of Awareness

A significant number of Indians prefer traditional endowment/savings plans over term plans due to a lack of understanding. Unlike term plans, which provide coverage for a specific period and focus solely on providing death benefits to beneficiaries, endowment plans combine savings with insurance. The added savings component can be appealing to people who have a habit of saving but may not fully grasp the importance of life insurance.

The Impact of Policy Bazaar

Fortunately, organizations like Policy Bazaar have taken significant steps to address this issue. Through their advertising campaigns, they have successfully raised awareness about the benefits of term plans. Although their primary aim was business growth, their efforts have undoubtedly contributed to increased awareness among the general public. This increase in awareness is a crucial step towards making life insurance more accessible to a broader audience.

Fraud and Trust in India

The fear of fraud significantly contributes to the hesitation of Indians to purchase life insurance. The media often reports instances of insurance fraud, which erodes public trust in the industry. As a result, many people avoid buying insurance altogether, preferring instead to rely on savings or dependents for financial security.

Conclusion: The Need for Change

It is clear that improving awareness and building trust are essential steps towards increasing life insurance penetration in India. Insurance companies and regulatory bodies must work together to offer more affordable plans and ensure transparency in their operations. Meanwhile, the media should play a role in educating the public about the benefits of life insurance and debunking common misconceptions.

Acknowledgments

Thank you for taking the time to read this article. If you have any questions or would like to share your thoughts, please feel free to comment below.

Regards,

Akshay K.