'The biggest reason why...': Zerodha's Nithin Kamath explains why life insurance baffles Indians

Buying life insurance is turning into a game of blindfolded chess and most Indians don’t even know the rules are changing. Reflecting on conversations he’s had, Zerodha co-founder Nithin Kamath in a post says the biggest reason people avoid life insurance is because policies are impossible to understand,  and getting harder every day. 

"I didn't know underwriting rules had become much tougher and rejections had gone up," he admits in a post on X, flagging the growing disconnect between what insurers sell and what customers think they’re buying.

Kamath’s concern isn’t unfounded. Underwriting — the process insurers use to assess applicants — has become more rigorous than ever. As Kamath’s post highlights, insurers are now demanding detailed medical disclosures and tests, leading to an increase in rejections, counteroffers with higher premiums, and slashed coverage amounts.

A screenshot Kamath shared explains how insurers are investigating health profiles deeply and rejecting cases or hiking premiums for risks that may have flown under the radar in earlier years.

Beyond this, choosing the right insurance company is now more critical than ever. While some insurers have stepped up with innovative offerings, others continue to push out products with limited benefits. Key metrics like a claim settlement ratio of 97%+, solvency ratios near 2, and ₹5,000 crore in annual premiums are what experts recommend checking before signing up.

Critical illness benefits, once a major draw, are now limited in duration, thanks to a regulatory shift by IRDAI. Most insurers now cap these add-ons to a few years, making it essential for buyers to know what they’re getting — and what they’re not.

Meanwhile, “claim guarantee” plans — offering assured payouts if approved post-medical tests — are gaining ground, albeit with higher premiums and limited availability.

Another emerging feature is instant claim payouts, offering a partial amount (like ₹2 lakh) quickly to tide over urgent expenses when claims are made within the first three years — a period notorious for long delays.

Zero-cost term plans, which refund premiums if surrendered within a window, are also seeing more relaxed conditions in 2025 but remain suitable only for specific profiles.

Finally, the MWP Act, often used to protect beneficiaries from creditors, is back in focus. But as Kamath’s concerns about complexity suggest, the act’s irrevocable nature can create problems if life circumstances change.

In Kamath’s words, "Perhaps the biggest reason why people don't have life insurance is because the policies are a nightmare to understand." And as insurers tighten the screws, buyers will need to be sharper than ever.