Average Life Insurance Premium in India Surges 42.6% Over Five Years
Indian policyholders are steadily increasing their financial coverage, leading to a 42.6 per cent rise in the average annual premium per life insurance policy over the past five fiscal years, according to an analysis of industry records.
What Happened
Data compiled by the Insurance Information Bureau (IIB) of India for the period spanning FY21 to FY25 reveals that the average annual premium per policy climbed from ₹15,567 in FY21 to ₹22,195 in FY25. Over this same duration, the overall volume of in-force life insurance policies across the country remained largely stable at approximately 34.3 crore.
The figures, highlighted in a statement by the Insurance Awareness Committee (IAC)- Life, indicate that policyholders are progressively opting for larger insurance covers rather than viewing life insurance merely as a tax-saving instrument or a one-off transaction.
Key Highlights
- Premium Expansion: Average annual premiums per policy rose by 42.6 per cent over the five-year timeframe.
- Surge in High-Value Cover: Policies with a sum assured greater than ₹50 lakh jumped 68 per cent, growing from 44 lakh policies in FY21 to 74 lakh in FY25, accounting for ₹975 billion in annual premiums.
- Shift Across Tiers: The share of policies offering coverage between ₹2 lakh and ₹5 lakh expanded by 5.6 percentage points, while the ₹10 lakh to ₹25 lakh bracket rose by 2 percentage points.
- Decline in Low-Coverage Policies: In FY21, policies with a sum assured of ₹2 lakh or lower constituted 65.1 per cent of all active policies. By FY25, this share dropped to 53.6 per cent.
- Persistent Protection Gap: Despite growth in higher sum assured categories, 87 per cent of India still faces a significant life insurance protection gap, which climbs above 90 per cent for individuals aged between 18 and 35.
Why This Matters
According to Kamlesh Rao, Chairperson of IAC- Life, the data reflects an increasing recognition of the role life insurance plays as life stages and responsibilities change. The shift toward higher protection levels has been driven by several elements, including increasing consumer awareness, income growth, inflation, and the impact of the Covid-19 pandemic, which highlighted vulnerabilities in household financial resilience.
Furthermore, life insurers have introduced more tailored coverage options designed to serve varied customer requirements, supporting life insurance as a tool for long-term protection alongside wealth-creation vehicles.
What to Watch Next
Efforts to tackle the country’s broader coverage deficit remain an active priority. The Insurance Awareness Committee, operating under the Life Insurance Council, was set up specifically to address the large protection gap, particularly the vulnerability observed in the 18-to-35 age demographic.
Frequently Asked Questions
How much did the average life insurance premium increase in India?
Between FY21 and FY25, the average annual premium per life insurance policy increased from ₹15,567 to ₹22,195, marking a 42.6 per cent increase.
Did the total number of life insurance policies grow significantly?
No. The total volume of in-force life insurance policies remained broadly unchanged at around 34.3 crore over the five-year period.
What is the extent of India’s life insurance protection gap?
Approximately 87 per cent of India experiences a significant life insurance protection gap, with the figure exceeding 90 per cent among people aged 18 to 35.
Source: Reported based on data compiled by the Insurance Information Bureau of India and statements issued by the Insurance Awareness Committee- Life via The Hindu BusinessLine.