Life insurance: Average annual premium per policy grew 42.6% in last 5 years in India

Policyholders are gradually boosting their coverage instead of treating life insurance as a one‑off or tax‑saving buy.

As Indian life‑insurance holders opt for larger sums assured, the average yearly premium per policy rose 42.6 % over the past five years.

An IIB‑India analysis of FY21‑FY25 life‑insurance figures shows a positive trend in the nation’s protection profile. Although the count of active policies stayed near 34.3 crore, the mean annual premium per policy climbed from ₹15,567 in FY21 to ₹22,195 in FY25.

These patterns indicate that buyers are boosting their coverage gradually instead of treating life insurance as a one‑off or tax‑saving buy, the Insurance Awareness Committee‑Life noted on Friday.

The portion of policies holding ₹2–5 lakh sum assured rose 5.6 percentage points, and the ₹10–25 lakh bracket added 2 points over FY21‑FY25. At the top tier, policies with sum assured above ₹50 lakh jumped 68 % — from 44 lakh in FY21 to 74 lakh in FY25 — producing ₹975 billion in yearly premium.

In FY21 about 65.1 % of active policies carried a sum assured of ₹2 lakh or less; by FY25 that share fell to 53.6 %. Every higher‑bracket segment showed steady growth during the period, according to the IAC‑Life release.

“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. It is encouraging to see policyholders consistently moving towards higher levels of insurance cover, reflecting a growing commitment to financial security for themselves and their families.”

Multiple forces are pushing the move toward larger coverage and higher premiums. Increased awareness of life‑insurance value, rising earnings, inflation, and changing life‑stage responsibilities have fueled demand for broader protection.

The COVID‑19 crisis and its fallout exposed coverage shortfalls, leading people to review their financial safety nets. Simultaneously, insurers rolled out more customized products that address varied needs, enhancing life‑insurance relevance and reach.

“Importantly, customers have understood the unique value proposition of life insurance. As a long-term protection and financial security tool, it complements other investment avenues. Most other traditional savings or investment products help create wealth whereas life insurance protects against the risks and volatility while doing the same,” the release added.

Indeed, 87 % of Indians still face a notable life‑insurance protection deficit, a gap that is widening and tops 90 % for the 18‑35 age group. This rising exposure jeopardizes household financial stability and goals. Tackling it urgently is vital for preserving the nation’s socio‑economic resilience and security. The Insurance Awareness Committee, established under the Life Insurance Council, will lead the response.

Published on August 15, 2026