India's life insurance coverage grows, but low-value policies still dominate
What's the story
India's life insurance policy landscape has evolved over the last five years, with a noticeable shift toward higher sum assured categories. According to data from the Insurance Information Bureau (IIB) for FY2021 to FY2025, the number of in-force policies with a sum assured of more than ₹50 lakh grew by 68%. However, policies with a sum assured of ₹2 lakh or less still account for over half of all in-force policies as of FY2025.
Policy evolution
Shift toward higher sum assured categories
The IIB data shows a gradual shift toward higher-value cover, with lower sum assured policies still accounting for a large chunk of the overall policy base.
The share of policies with a sum assured between ₹2 lakh and ₹5 lakh increased by 5.6% points from FY2021 to FY2025.
Meanwhile, the ₹10 lakh to ₹25 lakh category gained two percentage points during this period.
Policy stability
Stable overall policy base with increasing average premium
Despite the shift toward higher-value policies, the overall number of in-force life insurance policies remained stable at around 343 million during the period.
This indicates that the change in policy mix has largely been a transition toward higher-value policies within a relatively stable overall base.
The average annual premium per in-force policy also witnessed an increase from ₹15,567 in FY2021 to ₹22,195 by FY2025, a rise of nearly 43%.
Coverage adequacy
Coverage adequacy depends on individual factors
Despite the rise in high-value policies, IIB data shows that 53.6% of in-force policies as of FY2025 had a sum assured of ₹2 lakh or less.
This highlights two trends: an increasing share of higher coverage policies and a large existing base with relatively low sum assured.
However, it's important to note that the adequacy of life insurance cover depends on individual factors such as income, outstanding debt, dependents, and future financial obligations, not just the sum assured alone.