How India's Term Insurance Market is Evolving: Pricing Trends, Adoption, and Digital Distribution

For years, term insurance in India was treated as a small add-on, often bought for tax reasons and rarely revisited. That approach is starting to change. As household expenses rise and borrowing becomes more common, buyers are paying closer attention to how well their insurance would actually protect their families if income were disrupted.

This change has coincided with wider developments in the sector. Online purchasing has gained traction, product structures have evolved, and there is greater emphasis on whether coverage levels are adequate for long-term financial commitments.

For many policyholders, term insurance appears more affordable than in the past. The growth of online distribution has reduced operating costs for insurers, while the removal of GST on term insurance premiums has lowered the total amount paid by customers. Younger and healthier individuals are increasingly opting for higher coverage, such as a 1 crore term insurance policy, early in their careers.

At the same time, insurers are reviewing how long-term risk is assessed. Since term insurance policies often last 25-30 years, insurers have to consider how risks may change over time. This includes how people’s health trends evolve, the fact that people are living longer than before, and broader shifts in healthcare outcomes. All of these factors affect the likelihood of future claims over the life of a policy, which plays a bigger role in how insurers assess and price long-term term insurance today.

Instead of a one-size-fits-all approach, premiums tend to reflect who the policy is for and how long the insurer is taking on that risk.

Alongside changes in pricing, the way people approach buying term insurance is also beginning to shift. Life insurance penetration in India is still lower than what is seen in many other markets, but there is a growing recognition that many households do not have enough cover. People are no longer just asking whether they have insurance. The more common question now is whether the cover they hold would really be enough to support their family, given today’s responsibilities and the costs they are likely to face in the years ahead.

Rising household borrowing, longer working lives, and higher costs related to housing and education have brought attention to the financial impact of losing an earning member. In cities, this has prompted many people to take a second look at how much cover they really have. As housing loans, education costs, and day-to-day expenses rise, more buyers are realising that basic policies may fall short, and are opting for higher coverage that better reflects their financial responsibilities.

Younger professionals are also entering the term insurance market earlier than before. Rather than purchasing insurance only after major life events, term plans are increasingly being treated as a basic component of financial planning.

Digital platforms have played a growing role in changing how term insurance is bought and serviced. Processes that once depended heavily on agents and paperwork are increasingly being handled online.

Direct digital distribution has reduced reliance on intermediaries. This helps insurers streamline operations. In some cases, this has been reflected in pricing, particularly for online term insurance products. Digital platforms have also made it easier for consumers to compare policies based on coverage, premiums, and features, which is especially relevant for higher coverage amounts.

For many buyers today, the process is simply quicker than it used to be. If the details are straightforward, policies can move through without weeks of follow-ups. Much of the checking now happens digitally, reducing the need for manual review. Medical checks, which earlier involved multiple hospital visits, are increasingly done through tele-calls or existing records, making the process easier, particularly for higher cover amounts.

Recent regulatory and market developments have placed greater emphasis on transparency and customer-focused product design within the insurance sector. With changes in consumer behaviour and product design continuing, term insurance is increasingly being used as a tool to manage long-term household financial risk rather than as a standalone or reactive purchase.