Beyond Just Saving Money: How India's Term Insurance Buying Habits Are Changing Fast

India’s term insurance market is moving beyond price-led buying, one year after individual term life policies became exempt from GST. A new Policybazaar report indicates that the tax relief has not only made premiums cheaper, but also pushed buyers to reconsider how much financial protection their families need.

Term insurance adoption has risen by about 1.5 times since the exemption took effect, according to the report. The strongest signal is visible in the way customers are choosing larger covers and adding riders, rather than only buying the lowest-cost basic policy. For households, this marks a shift from viewing term insurance as a tax-saving or compulsory product to treating it as a core protection tool.

GST exemption changes term insurance buying behaviour

Before the exemption, GST added to the final premium paid by policyholders. Removing that cost lowered the upfront burden for individual buyers. In a price-sensitive market such as India, even a moderate reduction can influence decisions on cover size, policy tenure and optional benefits.

Policybazaar’s findings suggest that many customers are using the premium saving to upgrade protection. Instead of simply paying less for the same cover, buyers are opting for higher sum assured and wider coverage through riders. This is important because underinsurance remains a common problem in India, especially among households dependent on one income earner.

Varun Agarwal, Head of Term Insurance, Policybazaar, said, “The GST exemption on individual term life insurance has had an impact that goes beyond simply reducing the premium customers pay. What we are seeing is a fundamental shift in how consumers are approaching protection. Customers are using the affordability benefit to reassess their protection needs, opt for higher sum assured and add riders to create more comprehensive coverage.”

NRIs and HNIs move towards bigger life covers

The move towards high-value term insurance is most visible among non-resident Indians and high-net-worth individuals. The report says the NRI share of term covers of ₹3 crore and above rose 35% after the GST change. Among HNIs, the share of such large policies increased 32%.

This trend reflects two factors. First, affluent buyers often have larger liabilities, including home loans, business obligations, overseas expenses and lifestyle-linked family costs. Second, higher income groups are more likely to reassess protection needs when premiums become more efficient. For them, a GST exemption can make a meaningful difference on large annual premiums.

The preference for wider protection is also visible in rider choices. Rider adoption among NRIs increased 15%, while HNIs recorded a 9% rise. Riders are optional add-ons that expand the policy’s usefulness in specific situations. They can raise the overall premium, but may reduce financial risk for families if chosen carefully.

Women and homemakers show faster adoption

The report also points to a significant change in who is buying term insurance. Female purchases grew 27% faster than male purchases after the exemption. This suggests that more women are entering the protection market, either as income earners buying independent cover or as family members whose financial contribution is being recognised.

Homemakers recorded an even sharper trend, with 60% additional growth compared with other segments. This is a notable development for Indian households. A homemaker may not draw a salary, but the economic value of unpaid work can be substantial. Childcare, elder care, household management and daily support all carry replacement costs if that person is no longer present.

Self-employed individuals also showed stronger adoption, growing 12% faster than other customer groups. This segment usually lacks employer-provided life cover, group insurance or structured employee benefits. For self-employed professionals, traders and small business owners, individual term insurance can be a critical safety net for dependants and business-linked liabilities.

₹1 crore remains the preferred cover size

Despite rising interest in larger policies, ₹1 crore remains the most popular term insurance cover. It accounts for more than half of all purchases, according to Policybazaar. This level is often seen as an entry point for urban and semi-urban families seeking meaningful financial protection.

At the same time, covers of ₹2 crore and above continue to hold a steady 15% share. This shows that the market is not shifting uniformly towards very large policies. Instead, buyers appear to be segmenting by income, liabilities, family size and long-term goals such as children’s education or loan repayment.

Overall rider adoption rose 13% after the GST exemption. The increase was led mainly by Accidental Death Benefit and Waiver of Premium riders. An accidental death rider provides an additional payout if death occurs due to an accident. A waiver of premium rider helps keep the policy active if the policyholder meets specified conditions such as disability or critical illness, depending on policy terms.

Younger buyers and southern states lead growth

Younger customers are also entering the term insurance market earlier. The 18-25 age group posted 20% higher growth than other age brackets, followed by buyers aged 36-45. Buying early can reduce premium costs because term insurance pricing is closely linked to age, health and policy tenure.

The regional pattern also shows broader adoption beyond India’s largest metros. Andhra Pradesh and Telangana led the surge with 39% growth. Kerala followed with 11%, while Maharashtra recorded 10% growth. The data suggests that awareness of pure protection products is spreading across both established and emerging insurance markets.

For consumers, the key takeaway is not that every household needs the largest possible cover. The more relevant question is whether the chosen sum assured can replace income, clear liabilities and fund essential goals for dependants. The GST exemption has made that calculation more affordable, but the quality of the decision still depends on choosing the right cover, tenure and riders.

FAQs

What change affected individual term insurance premiums in India?

Individual term life insurance policies became exempt from GST, which removed GST from the final premium and lowered the upfront cost for buyers.

How did the GST exemption influence how people buy term insurance?

The report says buyers moved beyond focusing only on the lowest price and started reassessing protection needs by choosing higher sum assured and adding riders for more comprehensive coverage.

Which customer groups showed the strongest shift toward larger life covers after the GST change?

The increase toward term covers of ₹3 crore and above was most visible among non-resident Indians and high-net-worth individuals, with their shares rising by 35% and 32% respectively.

What trends were reported for women, homemakers, and self-employed customers?

Female purchases grew faster than male purchases after the exemption, with homemakers showing even stronger growth. Self-employed individuals also adopted term insurance more quickly than other groups.

What cover sizes and riders saw notable adoption changes after the GST exemption?

₹1 crore remained the most popular cover size, while the overall rider adoption rose by 13%, led mainly by Accidental Death Benefit and Waiver of Premium riders.