A recent shift in India's term insurance landscape shows that more than 50% of buyers are now choosing policies with a sum assured of ₹1 crore or higher. This significant change coincides with the exemption of individual term life insurance from Goods and Services Tax (GST), according to Policybazaar's “One Year of GST Reform” report.
GST Relief Fuels Higher Coverage Demand
The report reveals a substantial surge in demand for greater financial protection. In the year following the GST reform, term insurance adoption grew by approximately 1.5 times. While ₹1 crore remains the most popular sum assured, policies exceeding ₹2 crore now constitute 15% of total purchases. This suggests that buyers are not merely leveraging the tax relief for lower premiums but are proactively re-evaluating their coverage requirements.
High Net-worth Individuals (HNIs) and Non-Resident Indians (NRIs) are also contributing to this trend, with the share of ₹3 crore-plus covers increasing by 32% and 35% respectively within these affluent customer segments.
Broader Impact on Buying Patterns
The influence of GST relief extends beyond just increased sum assured. The report notes a 13% rise in rider adoption during the post-GST period. Popular choices include Accidental Death Benefit and Waiver of Premium riders, indicating a desire for more comprehensive protection.
Moreover, the market is seeing a faster entry of women and younger consumers. Female term insurance adoption outpaced male adoption by 27%, while the 18–25 age group recorded 20% higher growth compared to other age brackets, signaling a broadening consumer base for term life policies.
Calculating Adequate Term Insurance Cover
Financial planners emphasize that selecting a round figure like ₹1 crore might not be sufficient for everyone. The appropriate sum assured should be determined by a household's specific financial situation, including:
- Outstanding liabilities (e.g., home loans, education loans)
- Future financial goals (e.g., children's education, retirement)
- Income replacement needs
- Number of dependents
- Existing investments and insurance coverage
It is crucial to factor in inflation, as future expenses will likely be higher than current estimates. For instance, a person earning ₹15 lakh annually with significant loans and family obligations may find a ₹1 crore payout insufficient to cover decades of income loss and financial commitments. The primary objective should always be to secure enough coverage to protect dependents against income loss, debt, and future financial goals, rather than simply opting for the cheapest or most commonly purchased policy.