Term life buyers opt for higher cover and avoid long tenure policies

Rising premiums for longer durations and features like smart exit prompt shift to shorter term insurance policies with higher sums assured of ₹2-5 crore

Customers looking to buy term insurance are increasingly favouring higher sum insured, driven by rising awareness and attractive policy features, while focusing on shorter duration covers, industry insiders suggested, adding that higher premiums for long tenure policies has proved to be a dampener.

 

According to industry estimates, the share of customers opting for a cover less than or up to 70 years increased to 62.5 per cent in 2025 from around 47 per cent in 2023. While, the share of those opting for over 70 years cover has reduced to 36.8 per cent from 52 per cent. Customers are also opting for cover worth ₹2 crore and above instead of ₹1 crore earlier.

 

Varun Agarwal, Head of Term Insurance at Policybazaar said, “The term life insurance market is experiencing a shift driven by increased consumer awareness and evolving financial planning needs. Customers are opting for higher coverage amounts, moving from ₹1 crore to ₹2 crores-5 crores—reflecting rising incomes and a better understanding of financial protection. However, instead of extending policies up to ages 75–85 most buyers now prefer cover until ages 60–70, aligning with the typical end of financial liabilities and dependent responsibilities.”

 

“The industry has seen a 5-8 per cent drop in average coverage age, now trending between 65 and 70 years. There are also other factors such as cost of premium for longer tenure and new policy features like ‘smart exit’ option or a return of premium (excluding GST) which comes with a condition of minimum policy duration and a particular window where you can exit, at an age when financial liabilities are generally over are also influencing this shift,” Agarwal added.

 

“Smart Exit” in life insurance allows policyholders a refund for premiums paid if they exit the insurance plan before maturity after holding it for a minimum duration. However, it will not include premiums paid for any add-ons or due to underwriting risks or GST. 

 

Further, life insurance companies are also informing their customers and distributors on the importance of having term insurance policies till the age where their income is essential for the dependents or there is a need to replace the loss of income. Also, a longer tenure term insurance policy also increases the premium.

 

“Term insurance should ideally cover individuals only during their income-earning years. For salaried individuals, this typically ends around age 60, and for the self-employed, possibly until 70. Covering beyond this age increases premiums without serving the original purpose of protecting against income loss, as there is no income to replace post-retirement. By advocating coverage only until age 70, Tata AIA is aiming to either increase the sum assured for the same premium or reduce the customer’s financial burden-- ultimately offering better value,” said Sujeet Kothare, Executive Vice President – Products, Business Mid Office and Digital Marketing, Tata AIA Life Insurance

 

Even as individuals are not opting for longer tenure term insurance policies, they still understand that uncertainty is an important risk and opt for shorter termite products.

 

According to Vivek Iyer, Partner and Financial Services Risk Leader, Grant Thornton Bharat, “From an insurance company standpoint, this would be beneficial as claim risks come down as well the corresponding provisions. Insurance companies would need to strengthen the persistency tracking at their end to ensure renewal of such policies.”