Journal Press India^®

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Emerging research suggests that financial literacy and cognitive abilities play an important role in individuals’ healthcare and financial decision-making processes. A comprehensive review of literature suggests that a critical gap exists in our understanding of how psychological biases and financial literacy influence health insurance decisions. This study explores the complex interplay between major psychological biases, financial literacy, and investment decisions in the domain of health insurance. Using a CB-SEM technique, we inspected how overconfidence and risk aversion influence individuals’ financial knowledge and their subsequent choices regarding health insurance. Our findings reveal that psychological biases have a significant impact on both financial literacy and investment decisions. Additionally, we discovered that financial literacy serves as a mediator, reducing the negative consequences of biases on investment choices. These conclusions acme the importance of addressing psychological biases and promoting financial literacy to empower individuals to make informed decisions and improve their overall financial well-being, especially when it comes to health insurance.

Keywords

Financial literacy; Financial decision making; Health insurance; Psychological biases

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