In the 56th GST Council Meeting sweeping changes were announced; a major relief for Individuals & Families on life & health insurance premiums will no longer attract GST. Moreover, zero GST on life and health insurance will be levied. It ensures accessibility to financial security apart from healthcare coverage. Additionally, policies will become more affordable.
Over the past decades, policyholders have been paying 18 % GST on their premium plans, which increased the overall cost of premium. Buying insurance becomes more affordable as well as customer friendly after this announcement. Let us break down how zero percent GST on life & health insurance change means for you, your family and the insurance industry at large.
1. Understanding the New GST Rule
As before this 0% GST on life & health insurance, insurance premiums carried 18% GST, significantly increasing the total amount of premiums. For instance:
If a premium of term insurance amounts to 20000 annually it turns out to be 23,600 including GST.
And if we talk about health insurance, a premium of Rs. 30,000 annually, after 18% of GST it will add Rs. 5,400 to your total premium.
It is the additional cost that was restricting the families to purchase insurance policies. This is particularly applicable when one is dealing with multiple policies.
The new rule means that you will not have to pay GST on the premium. It implies:
The hallmarks of premiums are transparency and simplicity.
Money saved is money earned i.e. customers will save thousands of rupees now.
Instead of considering insurance as a financial burden, it becomes a pure protection tool.
This move will enable life as well as health insurance to be essential and not optional. It also aligns with the government’s mission of financial inclusion.
2. Why This Change Matters
GST exemptions on insurance premiums are more than just money-savings—they have a far-reaching impact on individuals, families, and the economy as well.
a) Boost in Affordability
With zero GST, families are motivated to prioritize insurance and will boost the affordability factor as the insurance premium reduces.
b) Protection
The popularity of health insurance, family floaters and other insurance products will rise as term insurance rates decrease. Insurers will now be able to reach out to a wider range of age groups due to this shift.
c) Wider Accessibility
Insurance was often seen as a product for the upper-middle class or working professionals. Rural and semi-urban households will benefit as the lower premiums are now available, thereby making quality health and life insurance affordable.
d) Substantial Rise in Confidence
Due to high upfront costs, many people delayed purchasing insurance. Restoring confidence among the people and exhibiting the government's commitment will be visible in a couple of months after 0% GST on life & health insurance.
3. Impact on Policyholders
The biggest winners of this GST removal are you, the policyholders.
They will benefit in the following manner:
Less Premium Amount: Imagine a person who is paying ₹50,000 annually for health insurance can now save ₹9,000 each year. Considering the same amount of savings for 10 years, he can save ₹90,000 which gives him more disposable income with which he can go for an extra rider or higher sum assured.
More Coverage in Same Budget: One can opt for riders like critical illness, accidental death benefit, or waiver of premium with the amount saved on GST as the enhanced coverage is available at minimal costs.
Multiple Policies will be cost friendly: People feel less burdened especially those who need separate policies for children, parents or senior citizens as holding multiple policies will be cost friendly.
Long Duration Policies: Small savings yield big results. Imagine a boy who is 25 years old and took a 30-year term plan can save enormous amounts over the years.
With the factors listed above, insurance is set to become a stronger financial tool.
4. A Boost for Insurance Penetration in India
As per IRDAI, India has one of the lowest insurance penetration rates globally, hovering around 3-4% of GDP, while health insurance coverage is limited to a small fraction of the population.
Why is penetration so low?
High premiums (especially with GST)
People have lack of awareness & importance of insurance
Preference for physical assets like gold or real estate
With GST removed:
First-time buyers: Young professionals and families will find entry-level premiums affordable.
Middle-income groups: More willing to invest in higher coverage amounts.
Rural markets: Micro-insurance and affordable premium models allow rural markets to tap the potential of insurance.
This move will accelerate India’s journey towards “Insurance for All by 2047”, as envisioned by the regulator.
5. Life Insurance Without GST – What Does It Offer
For any financial planning to succeed, life insurance becomes the backbone.
It ensures your family’s financial stability in case of unforeseen circumstances. Its impact will be seen in the coming days.
Benefits of Life Insurance Without GST
Lower Term Insurance Premiums: A pure protection term plan is now cheaper, enabling you to opt for larger coverage. For example, instead of paying ₹12,000 + GST = ₹14,160, you now pay only ₹12,000.
Savings Plans Become Attractive: Premiums are less expensive, endowment and money-back plans which mix insurance & savings now yield larger effective returns.
ULIPs (Unit Linked Insurance Plans): ULIPs have become GST-free. Therefore, they can compete with mutual funds. Unlike mutual funds, they have a component of investment and insurance.
By reducing your taxes on life insurance, you can achieve your financial planning goals with more protection for less money.
6. Health Insurance Without GST – A Major Relief
People were under tremendous stress with rising 15% medical inflation annually in India. When GST was levied on it, it only added misery to it. It was making healthcare unaffordable for many people.
Advantages of GST-Free Health Insurance
Cost-effective Premiums: A family floater plan of ₹30,000 now costs exactly ₹30,000, not ₹35,400. It accrues to saving of ₹5,400.
Higher Coverage: One can enhance the coverage amount without additional financial stress. For instance coverage of ₹10 lakh to ₹15 lakh can be done without additional financial stress.
Senior Citizen Plans: After zero percent GST on health insurance, health policies for older parents have become affordable.
Critical Illness Policies: Earlier what used to be difficult to afford has now become easy to afford especially the ones covering cancer, heart disease or organ transplants.
Top-Up & Super Top-Up Plans: These plans are particularly beneficial because they enable families to enhance their coverage without paying too much. With no GST, they’re an even smarter choice.
In this way, people safeguard themselves from the enhanced hospitalization costs and treatments.
7. GST Exemption's Economic and Social Impact
Besides just encouraging savings, GST exemption revamps the entire financial ecosystem too.
Financial Inclusion: With zero GST in place, insurance has become affordable. As a result, millions of families can now benefit.
Insurance Industry Growth: It is a win-win situation for policyholders getting better customer service as well as intermediaries experiencing higher demand.
In addition to benefiting individuals, this reform is beneficial to the nation as a whole.
8. What Should You Do Next?
People who are already a policyholder can:
Check renewal notice as well as payable amount as they will now be lower.
Opt to increase coverage since premiums became more affordable.
Adding riders for extra security by utilizing savings can be a better option.
In the event that you do not own insurance yet:
With a term plan purchased early, you can enjoy lower premiums and no GST.
Protect your entire household with family floater health insurance.
Affordably cover your parents' health care.
You should remember that your premiums increase each year due to age and health factors. Taking advantage of GST's repeal now allows you to secure your future.
How Solis Insurify IMF Helps You Benefit
At Solis Insurify, we simplify insurance for you. With the new rule of GST removal, Solis Insurify ensures to make insurance cost- effective and accessible.
How Solis Insurify helps is as follows:
Expert Guidance: Our expert team assesses your family’s need(s).
Plan Comparison: We ensure to help you find the best value insurance plan.
Transparent Process: Our process is completely transparent with no hidden fees or taxes.
Claim Assistance: we ensure that you’ll experience a smooth settlement.
Solis Insurify believes that insurance is not just a policy, it’s a security for your family.
Conclusion
Zero percent GST on life & health insurance premiums is a major change in the insurance industry. This new rule is to encourage people to buy insurance for them and their family’s protection, and build a stronger safety net for families across the nation. There has never been a better time to secure a future & buy insurance.
With Solis Insurify, you'll get expert guidance to get the cost-effective premiums and secure your & your families future.