India’s life insurance market is witnessing a gradual shift towards higher protection levels, with policyholders increasingly opting for larger coverage and spending more on financial protection, according to an analysis of FY2021-FY2025 business data compiled by the Insurance Information Bureau (IIB) of India. The data showed that the share of policies with a sum assured of ₹2 lakh-₹5 lakh increased by 5.6 percentage points between FY2021 and FY2025, while the ₹10 lakh-₹25 lakh category gained 2 percentage points. Policies with cover above ₹50 lakh rose 68% from 4.4 million to 7.4 million during the period, generating annual premium of ₹975 billion.
At the lower end, policies with a sum assured of ₹2 lakh or less accounted for 65.1% of in-force policies in FY2021, but fell to 53.6% by FY2025. The overall in-force policy base remained broadly stable at around 343 million, while average annual premium per policy climbed 42.6% from ₹15,567 to ₹22,195. Kamlesh Rao, Chairperson, Insurance Awareness Committee (IAC)-Life, said the trend indicated that consumers were strengthening protection as their incomes, responsibilities and aspirations evolved.
Rising incomes, inflation, greater awareness and lessons from the Covid-19 pandemic, along with more customised insurance products, are supporting demand. IAC-Life said life insurance is increasingly being viewed as a long-term protection and financial security instrument rather than merely a tax-saving product, with early adoption helping consumers secure coverage at lower premiums and enhance it over time.