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

Policyholders are strengthening their insurance cover over time rather than viewing life insurance as a one-time or tax-saving purchase.

With life insurance policyholders progressively strengthening their financial protection by opting for higher levels of coverage, average annual premium per policy increased by 42.6 per cent in the last five years in India.

An analysis of life insurance business data for FY21–FY25 compiled by the Insurance Information Bureau (IIB) of India has pointed to an encouraging shift in the country’s protection landscape. While the total number of in-force life insurance policies has remained broadly stable at around 34.3 crores over the five-year period, the average annual premium per policy increased from ₹15,567 in FY21 to ₹22,195 in FY25.

Together, these trends suggest that policyholders are strengthening their insurance cover over time rather than viewing life insurance as a one-time or tax-saving purchase, Insurance Awareness Committee (IAC)- Life said on Friday.

The share of policies with a sum assured between ₹2 lakh and ₹5 lakh increased by 5.6 per cent points, while the ₹10 lakh–₹25 lakh category gained 2 per cent points during FY21–FY25. At the higher end of the spectrum, the number of policies with a sum assured exceeding ₹50 lakh grew 68 per cent from 44 lakhs in FY21 to 74 lakhs in FY25, generating annual premium of ₹975 billion.

Meanwhile, in FY21, nearly two-thirds (65.1 per cent) of all in-force life insurance policies had a sum assured of ₹2 lakh or less. By FY25, this proportion had declined significantly to 53.6 per cent. Also, every higher sum assured category registered consistent growth over the same period, IAC- Life said in a release.

Kamlesh Rao, Chairperson, Insurance Awareness Committee- Life, said, “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.”

Several factors are driving the shift towards higher coverage and premium outlay. Growing awareness of the importance of life insurance, rising incomes, inflation, and evolving life stages and responsibilities have all contributed to greater demand for comprehensive protection.

The Covid-19 pandemic and its aftermath further highlighted protection gaps, prompting individuals to reassess their financial resilience. At the same time, insurers have introduced more tailored solutions catering to diverse customer needs, making life insurance more relevant and accessible.

“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.

Notably, 87 per cent of India continues to grapple with a significant life insurance protection gap, which continues to increase, exceeding 90 per cent amongst those aged 18–35. This growing vulnerability is a threat to families’ financial security and aspirations. Addressing this challenge on a war footing is crucial to maintaining our society’s socio-economic resilience and security. The Insurance Awareness Committee was formed under the aegis of the Life Insurance Council to take action on this issue.

Published on August 15, 2026