India’s insurance reset in 2025: Know how Indians insured, invested & paid for policy

Insurance

• Health coverage rose after GST removal, with high-value policies nearly doubling
• Tier-three cities now account for 70% of insurance purchases, up from 63%.
• UPI handles 64% of premium payments, indicating a shift to instant transactions.

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Something's changed in how Indians buy insurance. After the government scrapped GST on health premiums, people didn't just buy more policies; they bought better ones. Health coverage that averaged 14.5 lakh rupees before the tax removal now sits closer to 19 lakh rupees, according to Policybazaar Decoding India’s Financial Behaviour in 2025 report.

High-value policies above Rs 25 lakhs have nearly doubled, while cheaper options below Rs 10 lakhs have dropped by 24 percent. People are also locking in longer terms, with four and five-year policies jumping over 56 and 62 percent respectively.

Smaller cities are driving this boom. Tier-three towns now account for 70 percent of purchases, up from sixty-three percent last year. Delhi and Bengaluru still lead in absolute numbers, but the real action is happening beyond metros.

Term insurance grew 37 percent, powered mostly by buyers between 25 and 40. Rs 1 crore remains the go-to coverage amount, though bigger policies are catching on. Men still dominate at 80 percent of buyers, but women show stronger interest in critical illness riders while men prefer accident and disability add-ons.

How India rethought motor insurance

Motor insurance is being reshaped by electric vehicles. EV policy volumes grew 2.5 times with premiums tripling far outpacing petrol and diesel vehicles stuck in single-digit growth. Three-quarters of buyers now add roadside assistance, and 60 percent pick zero depreciation coverage.

For brand-new cars, these rates climb even higher.

Pay-as-you-drive plans have hit mainstream, with 15 to 25 percent of customers choosing usage-based pricing. They're declaring 7,500 to 8,500 kilometers annually and saving 25 to 30 percent on premiums.

Travel insurance became an essential

Travel insurance jumped 15 percent as it became standard trip planning. Germany topped destinations, followed by Thailand. Americans and Canadians pushed coverage to half a million dollars given sky-high healthcare costs there. Senior citizens now make up 15 percent of insured travellers.

Millennials lead investment as retirement planning hits the early button

The investment story belongs to millennials in their 30s, who drive half of all purchases. But here's the surprise: people under thirty-five now buy one in four retirement plans, triple last year's share. The FIRE movement (financial independence, retire early) is taking root.

Payment habits have flipped

UPI handles 64 percent of all premium transactions. Credit and debit cards together take another 27 percent. UPI autopay added 1.5 million mandates, while five lakh customers used buy-now-pay-later for premiums.

Purchases spiked 14 percent after GST removal and jumped 35 percent during Diwali festivities compared to last year.

The bigger picture? Indians aren't just buying insurance because they have to. They're buying more of it, better versions of it, and paying for it instantly through their phones. The market's moved from compliance to protection, from minimum coverage to serious financial planning.