Large-ticket term policies gain traction; share above ₹2 cr rises to 34%

The share of policies below ₹2 crore fell to 66 per cent from 76 per cent over the same period

A growing share of Indian consumers are opting for term insurance covers above Rs 2 crore, following the government's decision to rationalise goods and services tax (GST) from 18 per cent to zero on retail protection plans, in a shift that is reshaping the product mix at the country's largest private life insurers.

 

Data from Policybazaar showed policies with a sum assured above Rs 2 crore accounted for 34 per cent of term insurance sales in FY26, up from 24 per cent a year earlier — a 10-percentage-point swing that reflects both the direct affordability benefit of the September 2025 GST exemption and a broader reassessment of household risk exposure.

 

The share of policies below Rs 2 crore fell to 66 per cent from 76 per cent over the same period.

 

"People were gradually opting for higher sum assured policies, but post-GST affordability has also helped — driven by better affordability, competitive pricing, increased awareness, and customers recognising the need for larger covers due to inflation and rising financial responsibilities," said Varun Agarwal, head of term insurance, Policybazaar.

 

The exemption, which rationalised an 18 per cent levy on retail term policies, lowered monthly premiums meaningfully and appears to have cleared a psychological price barrier for consumers considering larger covers. Industry executives say inflation and rising household financial obligations are reinforcing the trend, pushing buyers to recalibrate the adequacy of existing protection.

 

Protection has historically lagged savings-oriented and unit-linked products in India's insurance market. Executives and distributors argue the GST change has reset the baseline, though the segment's overall share remains modest and the pace of gains will depend on whether competitive pricing and consumer awareness continue to build.

 

"We classify high-value cover as Rs 2 crore and above. The demand signal is striking. Looking at what customers are actively applying for — ahead of underwriting and issuance — Rs 2 crore-plus term proposals rose around 57% in the post-GST period versus the comparable pre-GST window. The average cover being sought increased from approximately Rs 3 crore to Rs 4 crore. How much of this converts into issued policies will play out through underwriting, but the intent to buy larger cover is unmistakably strengthening," said Rushabh Gandhi, MD & CEO, IndiaFirst Life Insurance.

 

"Four forces are converging. The GST exemption has permanently improved affordability — the same outlay now buys a larger cover. The pandemic durably reset how families assess income replacement, mortgages and dependants' needs. Rising incomes and household liabilities mean a Rs 50 lakh cover that sufficed a decade ago no longer does. And awareness has compounded through digital channels and advisers. Encouragingly, this is not only a metro story — we are seeing larger-cover demand build across Tier-II and Tier-III markets too," he said, adding that this is a durable structural shift, not a one-year spike.

 

"The GST benefit is permanent, awareness keeps building, and enhanced underwriting techniques are making larger-cover journeys frictionless. We expect momentum to sustain on both fronts — a broad democratisation of protection at the entry level, alongside the Rs 2 crore-plus segment deepening further," he said further.

 

The momentum is translating into strong numbers across the sector.

 

ICICI Prudential Life said industry retail sum assured grew at 2.5 times the pre-reform rate in the six months following the tax change. Its own retail new business sum assured reached Rs 4.5 trillion in FY26, with retail protection expanding 50.9 per cent year-on-year (YoY) in the second half of FY26 (H2FY26). HDFC Life reported 43 per cent growth in retail protection, with term insurance's share of individual annualised premium equivalent rising to 7 per cent from 5 per cent. SBI Life reported that protection contributed Rs 2,240 crore to APE — 9 per cent of the total — recording 10 per cent year-on-year growth.