Risk pooling is a fundamental function of health financing that helps spread financial risk associated with healthcare cost across a group, ensuring that individuals are protected from catastrophic health expenditures. This chapter begins by discussing the need for risk pooling in healthcare, highlighting its role in financial protection and improved access to healthcare services. It then explores the concept of risk pooling. In the later sections, this chapter introduces the fundamental prerequisites for the effective functioning of voluntary private health insurance (VPHI). It then examines how violations of these conditions contribute to the failure of voluntary private insurance in healthcare and the resulting consequences for the health system. Finally, the chapter explores potential corrective measures to address these market failures and discusses the possible role of VPHI in financing health.