Mind The Gap: Why Many Indians Still Delay Buying Term Insurance

A 40-year-old salaried professional in Mumbai knows that term insurance is the most affordable way to protect his family. He has read articles, seen ads, and even discussed it with friends. Yet, when it comes to signing up, he keeps postponing. "Maybe next year," he tells himself, as he prioritises a new SUV EMI instead.

Despite growing financial awareness, India continues to grapple with an under-insured population. According to IRDAI data, insurance penetration in India stands at around 4.2 per cent of GDP, and within that, pure protection products like term insurance make up only a fraction.

Why Do So Many People Hesitate?

The Myths That Hold People Back

One reason is the persistent myth that term insurance is a "waste" because it doesn't return money if you survive. For many households, investments are seen as more rewarding than protection. But this thinking overlooks the very purpose of term insurance: it's not about returns, it's about guaranteeing financial continuity.

Another barrier is procrastination. Buying insurance feels like admitting vulnerability, something many prefer to defer. Add to this the perception of a complex buying process, and the decision gets pushed further down the to-do list.

Trust And The Human Factor

It's not that insurance companies are unwilling; on the contrary, digital platforms and transparent products have made term plans easier to access than ever before. The gap lies in trust and prioritisation. Many Indians still rely on informal advice or compare products only superficially, leaving them confused rather than confident.

Venkatesh Naidu, CEO of BajajCapital Insurance Broking Ltd, explains: "The challenge is not availability, but awareness. Term insurance is perhaps the simplest financial product; it's pure protection at the lowest cost. Yet, many people get distracted by short-term returns and ignore the long-term security their families truly need."

Data Tells The Story

As per industry surveys, less than 30 per cent of insured Indians hold a pure term policy, even though financial planners universally agree it should be the foundation of protection. Meanwhile, the average sum assured for those who do buy is often just 5–7 times their annual income, when the global benchmark suggests at least 10–15 times.

This shortfall matters. Without adequate cover, families may be forced to liquidate assets, take loans, or compromise on education and lifestyle goals if the primary earner is no longer around.

The good news is, the trend is shifting. Young professionals in metro cities are beginning to see term insurance as a must-have, not an optional extra. Digital calculators and advisor-led conversations now make it easier to decide on the right sum assured and tenure.

For most households, a simple rule of thumb works:

• Cover at least 10 - 15 times your annual income

• Match the policy term with your earning years (till 60 or retirement)

• Keep it affordable - term plans cost less than a daily cup of coffee for significant coverage

Naidu adds, "Financial planning is not about choosing between protection and growth. It is about sequencing them wisely. First protect, then invest. That way, no matter what life throws at you, your dreams remain intact."

The reluctance to buy term insurance is not a failure of the industry but a reflection of human behaviour - our tendency to prioritise the visible (returns, consumption) over the invisible (protection). By reframing the conversation from "expense" to "essential shield," more Indians can take that crucial first step towards true financial security.

After all, one's SUV may depreciate over time. However, a well-chosen term plan will ensure that one's family never has to downsize their dreams.