India's life insurance market shows a stark disconnect between premium growth and actual protection coverage. According to reports from NDTV Profit, new premium income grew at healthy double-digit rates in the first two months of FY26, yet the average LIC policy sold during these months provided only ₹3.78 lakh in death cover. For the full financial year 2025-26, the average new individual policy sold by LIC carried a death cover of approximately ₹3.55 lakh. This coverage amount raises questions about whether it would adequately cover even a modest household's expenses, clear a home loan, or replace an earning member's salary.
The low coverage stems primarily from the structure of life insurance products sold in India. As reported by NDTV Profit, across all individual new business in 2025-26, a rupee of annual premium bought roughly ₹24 of cover. In contrast, a pure term plan without a savings component would provide many times that amount for a healthy young buyer. The average LIC policyholder pays approximately ₹19,400 annually for the ₹3.55 lakh cover on a typical savings policy, while the same amount spent on term insurance would cover a healthy thirty-year-old for ₹1.5 crore. This significant difference exists because savings-led plans allocate a small portion to mortality charges while investing the remainder to return at maturity, typically at low rates of 4-6%.
LIC's business composition reveals a different picture from premium growth figures. According to NDTV Profit reports, LIC collected more than ₹1.85 lakh crore of new premium in 2025-26, with approximately 71% coming from group business booked as one-time lump sums including superannuation funds, gratuity funds, and annuities. The death cover on all this group business totaled only ₹491 crore, representing less than a paisa of cover for every rupee of premium. LIC's accounts show that of all premium collected in 2024-25, around 95 paise in every rupee went into participating savings, pension and group schemes, with pure protection being a rounding error.
India purchased more than ₹4.5 lakh crore of new life insurance premium in 2025-26, a record amount according to NDTV Profit. However, when excluding group insurance policies that cover loans and employer obligations, the all-India average cover bought by regular-premium policies amounts to approximately ₹16 lakh. This figure is better than LIC's numbers due to private insurers selling more term insurance, but still falls short of what would truly cover a family. The analysis suggests that India is not under-buying life insurance but is over-buying the wrong kind, having transformed a protection product into a savings habit.
