Are You Overinsured or Underinsured? The Simple Test Most Indians Haven’t Taken

More than 50 crore Indians now own some form of insurance, whether it's life, health, or accident cover. This marks a remarkable shift in awareness. But a closer look reveals a worrying trend. According to the National Insurance Academy’s 2023 report, India faces an 87% life insurance protection gap and a 73% health protection gap—demonstrating that a vast majority of policyholders remain underinsured or misaligned with their actual financial needs.

We're buying insurance. What we're not doing is aligning it with our lives.

Take the case of a 45-year-old executive in Bengaluru. He had a life insurance policy, purchased over a decade ago. But when he passed away unexpectedly, the payout was just Rs 30 lakh -- barely enough to cover the family's home loan, let alone his children's education or his spouse's financial security.

It wasn't a lack of planning. It was a lack of updating.

And it's a silent crisis that's playing out in millions of Indian households.

The Gap We Don’t See Until It’s Too Late

Many people assume that once they’ve bought an insurance policy, the job is done. But life moves forward, responsibilities increase, incomes rise, costs inflate, and most people don’t stop to reassess.

The result is often one of two extremes:

Too little coverage, which doesn’t hold up in a real emergency, or

Too many disconnected policies, bought without understanding what they actually cover.

Both scenarios give the illusion of safety, but not the substance.

The ‘Insurance Fitness Test’ Every Indian Should Take

Sanjiv Bajaj, Joint Chairman and MD at BajajCapital, sees this pattern regularly.

“Many working professionals in their 30s and 40s assume that a Rs 25–50 lakh of term cover is enough because someone told them so. We often meet clients with three policies and no clarity. One from their employer, one from a bank, and one bought during tax season. But when you add up their real needs, income replacement, children’s education, and outstanding debt, the number falls painfully short,” he says.

That’s where the Insurance Fitness Test comes in.

It’s a simple checklist, a kind of health screening for your financial safety net. Ask yourself:

Is your term cover at least 10–15 times your annual income?

Does your health insurance reflect the current cost of treatment in your city?

Would your family know how to locate and claim your policies, if needed?

Are you covered for critical illnesses, not just hospitalisation or accidents?

Is your insurance aligned with your current life stage, married, kids, loans, ageing parents?

This isn’t about buying the most expensive policy. It’s about ensuring that what you’ve bought still fits.

Real Stories. Real Misalignment

Consider a couple who purchased a Rs 1-crore joint-life term plan, believing it covered them both equally. But during a claim, they learned the policy had a first-death clause. So, only one payout would ever be made.

Or take someone who owns multiple accidental insurance plans but has no term cover or critical illness protection. They’re over-insured in one narrow area and dangerously exposed in others.

These aren’t rare mistakes. They’re common oversights, rooted in the belief that some insurance is good enough.

Why Reviews Matter

“Insurance,” Bajaj says, “is like clothing. It has to fit your life stage.” As life changes-marriage, children, home loans, ageing parents, your insurance must evolve too.

Yet many of us rarely go back to reassess what we once bought.

It’s a habit rooted in comfort and routine—set it and forget it. But life doesn’t pause, and neither should your protection.

Bajaj offers a simple metaphor: “Imagine buying a raincoat in college, and still relying on it during a heavy downpour two decades later. Chances are, it won’t fit your body-or the weather-anymore.”

So, How Do You Know If You’re Covered Right?

There’s one powerful question that can help you decide:

“If something were to happen to me tomorrow, would this plan be enough to keep my family’s life on track, without disruption?”

If the answer isn’t a confident yes, it’s time to review.

Start by listing all your policies. Map them to your real-world responsibilities—your income, dependents, loans, and future goals. Then speak with a qualified advisor to understand the gaps and overlaps.

The Good News: You Can Fix It

India is embracing insurance like never before. That’s a promising shift. But now comes the important part: making sure what we’ve bought will truly protect what matters. Because the goal isn’t just to have a policy—it’s to have the right one.

One that adapts to your life. One that your family can count on. One that keeps the promise, when it’s needed the most.