["Review of Development Economics, EarlyView. ", "\nABSTRACT\nThis study examines the impact of multi‐level health insurance on household financial vulnerability in China. Employing data from the 2019 China Household Finance Survey (CHFS), strong evidence is found that participation in multi‐level health insurance significantly reduces household financial vulnerability. Consistent conclusions are drawn across various dimensions within the multi‐level insurance framework. Mechanism analysis reveals that participation lowers financial vulnerability by reducing catastrophic health expenditures, mitigating household health risks, and increasing the probability of holding risky assets. Furthermore, the positive effect of multi‐level health insurance on reducing financial vulnerability is found to be more pronounced for high‐income households, while no significant urban–rural disparity is observed. Basing on these findings, we recommend that the government should further strengthen the multi‐tiered health insurance system, placing greater emphasis on enhancing the role of supplementary and commercial health insurance, while providing targeted enrollment subsidies for disadvantaged groups such as low‐income households.\n"]