The Goods and Services Tax (GST) is getting its biggest update since 2017, and one of the most notable changes affects individual life and health insurance. From September 22, 2025, premiums for these policies are expected to be fully exempt from GST. This could make insurance more affordable for millions of households and encourage wider adoption of financial protection.
WHAT THIS MEANS FOR POLICYHOLDERS
Until now, individual health and life insurance premiums were taxed at 18%. With the GST exemption, premiums are expected to drop.
For instance, a health insurance policy with a Rs 15,000 annual premium, previously costing about Rs 17,700 including GST, could now cost closer to Rs 15,000. Similarly, a Rs 25,000 term life policy might come down to around Rs 25,000, instead of Rs 29,500.
Therefore, with GST exemption, premiums could become lower, potentially saving policyholders several thousand rupees. The change is expected to cover all individual policies, including term plans, ULIPs, endowments, and senior citizen health plans.
While the savings are likely to be immediate for premiums paid after September 22, 2025, actual benefits may vary depending on insurers’ pricing and policy terms. Families may find it easier to buy new coverage or renew existing policies, but the exact impact will become clearer once the new rules take effect.
Rakesh Goyal, Director at Probus, says the move is more than just a numbers game. “The GST relief on individual health and life insurance premiums is a decisive step toward making insurance more accessible. Affordability has long been a barrier to insurance penetration. Lower premiums will encourage more households to buy coverage and improve renewal rates.”
Amit Ganorkar, MD & CEO of TATA AIG General Insurance, adds, “This relief will make protection more affordable for millions. Wider adoption of health insurance is critical in India, where out-of-pocket healthcare costs are high.”
Dr. Sabine Kapasi, CEO at Enira Consulting and UN advisor, notes that while government schemes like Ayushman Bharat have helped financially disadvantaged groups, the “missing middle” often cannot afford private insurance. Removing GST from premiums directly benefits this segment, encouraging timely treatment and easing pressure on hospitals.
