Health insurance is crucial as it provides individuals with financial protection against unforeseen medical expenses. It offers coverage for hospitalisation, treatments, and medications, ensuring that individuals can access necessary healthcare without incurring exorbitant costs.

Despite its importance, it is surprising that many individuals opt to forgo purchasing a health insurance policy. This decision leaves them vulnerable to significant financial risks and potential hardships in the event of unexpected medical expenses.

In this article, we explore the reasons behind this.

Financial constraints
One primary reason people skip buying health insurance is financial constraints. For individuals living paycheck to paycheck or facing tight budgets, health insurance premiums may be seen as an additional financial burden.

Ajay Shah, Head – Distribution, Care Health Insurance said, “Many times, people choose to skip buying a health insurance policy due to the cost (premium) associated with health insurance, which can be challenging for individuals or families on a tight budget. The premiums, and deductibles & co-pays applicable on claims, cumulatively make it difficult to afford health coverage.”

“India is also a market dominated by the return on policy, primarily due to high awareness of life insurance. As health insurance policies are pure risk policies with no return component, many people do not seriously consider purchasing health insurance. They perceive it as a waste of money,” Nikhil Apte, Chief Product Officer, Product Factory (Health), Royal Sundaram General Insurance added.

However, it is crucial to recognize that the cost of medical treatment without insurance can be significantly higher, potentially leading to financial hardships and debt.

Belief in good health
Another common reason for skipping health insurance is the belief in good health.

Commenting on the same, Aftab Chaz, Associate Director and Business Head at Elephant (Alliance Insurance Brokers) said, “Some young and healthy individuals feel that they are less likely to require medical services, whereas others perceive themselves to have a low risk of medical problems and may be less inclined to purchase health insurance. There is also an increasing belief in India that, "Nothing will happen to me and my family". Thus, people do not prefer investing in health insurance, thinking it is an unnecessary expenditure.”

While it is essential to maintain a healthy lifestyle, unforeseen accidents or sudden illnesses can occur at any time, leaving individuals financially vulnerable without insurance coverage.

Misunderstanding insurance coverage

Lack of understanding about health insurance coverage and its benefits is another factor contributing to the decision to skip purchasing a policy.

Speaking on the same, Aftab Chaz said, “This especially happens in the smaller pockets of the country, where people are less aware of health insurance and the benefits it brings. For the ones who are aware, they might find challenges in buying the right insurance policy, due to lack of availability and accessibility. The policies available in those regions and cities may turn out to be unaffordable for them, based on their income capacity.”

“Thus in Tier 2/3 cities and beyond, many individuals choose alternative healthcare options such as self-insuring, relying on government-funded programs, and participating in health cost-sharing ministries or cooperatives instead of traditional health insurance,” he added.

Employer-provided coverage

Some individuals rely solely on their employer-provided health insurance, assuming that it provides sufficient coverage. While employer-sponsored health plans are beneficial, they may not cater to every individual's specific needs.

“Several government employees, who are covered under CGHS, and private employees, who are covered by their employers under GMC, don't realise that after retirement (for private employees) or job exit, that policy will no longer be valid, leaving them without any individual health insurance cover until the end of their life,” Nikhil Apte added.

It is important to assess the comprehensiveness and portability of employer-provided coverage and consider supplemental individual policies to ensure continuous protection.

Unawareness of available optionsLack of awareness about the variety of health insurance options available is a contributing factor to skipping the purchase of a policy. Many individuals may not be aware of the range of plans, coverage levels, and customization options available in the market.

“Additionally, understanding the nomenclature, coverage options, benefits, exclusions and other terms & conditions of insurance can be overwhelming for any individual. This lack of understanding can create confusion that tends to delay decision-making,” Ajay Shah added.

Without adequate coverage, individuals are exposed to the risk of incurring high medical costs, which can lead to financial hardships and debt. It is crucial for individuals to prioritise health insurance as an integral part of their financial planning to safeguard their well-being and secure their financial future.