Fewer Indians Seem To Have Life Insurance Now. Here’s Why

Of the salaried men and women surveyed in 2024, only 37 per cent of Indians invested in life insurance-linked investment products in 2024, a sharp drop from 46 per cent in 2022

Traditional insurance products like endowment policies and ULIPs, once staples of Indian financial planning, are now falling out of favour.

Source : Pexels

By AR Hemant

The BankBazaar Moneymood 2025 survey report revealed a troubling trend: life insurance uptake in India is on the decline. Of the salaried men and women surveyed in 2024, only 37 per cent of Indians invested in life insurance-linked investment products in 2024, a sharp drop from 46 per cent in 2022. This lack of coverage leaves households vulnerable and also highlights a broader shift in financial behaviour among salaried Indians. Let’s unpack the reasons behind this trend.

Endowment Plans and ULIPs Lose Their Shine

Traditional insurance products like endowment policies and ULIPs, once staples of Indian financial planning, are now falling out of favour. These products often combine high costs, limited coverage, and opaque fee structures with subpar returns. Today’s investor, seeking higher growth and better transparency, prefers alternatives like mutual funds. Why lock your money for decades when a systematic investment plan (SIP) offers liquidity and market-driven growth? The numbers speak for themselves. SIPs have grown significantly in popularity, overshadowing investment-linked insurance products. The Moneymood survey tracks a sharp rise in Indians preferring to save and invest via mutual funds. 

Tax Policy and Changing Preferences

The new tax regime has further diminished life insurance’s appeal by removing deductions for premiums which were once a key incentive for policyholders. Additionally, bundled products like ULIPs lack the flexibility of modern investment tools. Indians are also becoming more financially literate, understanding that insurance is best used for protection, not investment. Many are opting for term plans for life cover while channelling their investments into market-linked instruments. Fintech platforms have also made accessing alternatives easier, leaving traditional insurers struggling to keep up.

Are You Adequately Covered?

Despite these trends, life insurance remains indispensable. A term plan with coverage of 10-20 times your annual income ensures your family’s financial security in your absence. For instance, if you earn Rs 10 lakh annually, aim for coverage of Rs 1-2 crore. Riders like critical illness or accidental death benefits can provide additional protection. Skipping life insurance might seem like a cost-saving measure now, but it’s a cornerstone of a robust financial plan.

Health Insurance on the Rise

While life insurance struggles, health insurance is gaining traction. More Indians reported health coverage in 2024, likely spurred by rising healthcare costs. Ideally, your health insurance should match your annual income, with an additional top-up for comprehensive protection. For example, if you earn Rs 12 lakh, opt for a Rs 12 lakh policy with a similar top-up. This ensures financial resilience against medical emergencies, which are becoming increasingly expensive.

Striking the Right Balance

The declining interest in life insurance is concerning. But clearly, the solution lies in balance. A sound financial plan must include adequate term coverage, sufficient health insurance, and growth-oriented investments like mutual funds. Insurers for their part must innovate and offer transparent, flexible products that cater to today’s discerning consumers and their evolving needs.

While the rise of SIPs and health insurance is promising, the neglect of life insurance poses risks. As Indians embrace smarter investments, they mustn’t forget that financial growth is meaningless without protection. When in doubt, consult an investment advisor.

(The writer is Head of Communications, BankBazaar.com and the co-author of the money management guide, ‘The Bee, the Beetle and the Money Bug’. This article has been published as part of a special arrangement with BankBazaar)