Indian life insurance policyholders are prioritizing higher protection levels and larger sum-assured covers, according to an analysis of Insurance Information Bureau (IIB) data spanning FY2021 to FY2025.
While the total volume of active policies remained largely stable over the five-year period, policyholders significantly increased their financial commitment toward insurance protection.
Key Takeaways from the IIB Data
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42.6% Jump in Average Premium: The average annual premium per in-force policy increased to ₹22,195 in FY2025, up from ₹15,567 in FY2021.
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Steady Policy Volumes: Overall in-force policies held steady at approximately 34.3 crore (343 million) across the five-year timeframe, indicating that growth is being driven by higher spending per policyholder rather than mere volume expansion.
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Surge in High-Value Cover (>₹50 Lakh): Policies offering a sum assured exceeding ₹50 lakh surged by 68%—growing from 4.4 million in FY2021 to 7.4 million in FY2025. This high-value segment generated ₹97,500 crore (₹975 billion) in annual premiums in FY2025.
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Decline in Low-Cover Policies: Policies with a sum assured of ₹2 lakh or less accounted for 65.1% of all active policies in FY2021. By FY2025, that share dropped to 53.6%, reflecting a shift away from token or purely tax-saving insurance purchases.
Shift in Sum-Assured Categories (FY21 vs. FY25)
| Sum Assured Category | FY2021 Share | FY2025 Share | Trend / Change |
| ≤ ₹2 Lakh | 65.1% | 53.6% | Declined by 11.5 percentage points |
| ₹2 Lakh – ₹5 Lakh | Baseline | +5.6 percentage points | Grew moderately |
| ₹10 Lakh – ₹25 Lakh | Baseline | +2.0 percentage points | Grew moderately |
| > ₹50 Lakh | 4.4 million policies | 7.4 million policies | Surged 68% |
What’s Driving the Trend?
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Evolving Perception of Insurance: Policyholders are treating life insurance as a comprehensive risk protection tool rather than solely a traditional investment or tax-saving vehicle under Section 80C.
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Rising Incomes & Inflation: Income growth and inflationary pressures have made lower-tier policies (e.g., ₹2 lakh cover) insufficient to meet family protection needs, prompting buyers to opt for higher coverage multiples.
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Changing Lifecycle Demands: As policyholders age and family financial responsibilities expand, existing buyers are upgrading their sum-assured amounts during policy renewals and life milestone events.
“The IIB data clearly demonstrates that Indians who stay invested in life insurance increasingly recognise its value and strengthen their protection as their lives and responsibilities evolve.”
— Kamlesh Rao, Chairperson, Insurance Awareness Committee (IAC)-Life
