Health and Life Insurance Premiums Now GST-Free: How Much You Can Save

From September 22, 2025, all individual health and life insurance policies in India have become GST-free. This reform eliminates the 18% Goods and Services Tax (GST) that was previously levied on insurance premiums, making policies more affordable for millions of households. Experts believe this move will not only reduce financial pressure on families but also boost insurance adoption across the country.

Which Policies Are Covered?

According to Finance Minister Nirmala Sitharaman, the GST exemption applies to:

• Individual health insurance policies – including family floater plans, senior citizen health covers, and reinsurance.

• Individual life insurance policies – such as term insurance, ULIPs, endowment plans, and their reinsurance products.

However, group medical coverage (GMC) for businesses will continue to attract 18% GST, which may still pose challenges for smaller enterprises.

How Much Will You Save on Premiums?

Before this reform, insurance policies carried an additional 18% tax burden. With GST removed, policyholders will now see a direct reduction in annual costs.

For example:

• A health insurance policy that previously cost ₹15,000 including GST will now be priced around ₹12,800, saving the buyer ₹2,200 annually.

• A family paying ₹25,000 in annual premium earlier had to bear an extra ₹4,500 as GST. With the exemption, this amount stays in their pocket and can be used for healthcare or other essential needs.

These savings are particularly significant for senior citizens and middle-income families, who often find high insurance costs a barrier.

Who Benefits the Most?

Industry experts highlight that the reform will help first-time buyers, middle-class households, and senior citizens the most.

• Balachander Sekhar, Co-founder and CEO of RenewBuy, explained that the reduction makes insurance more accessible, especially for elderly individuals who face higher premium costs.

• Pankaj Nawani, CEO of Carepal Secure, emphasized that families can now redirect the saved GST amount towards healthcare or other critical expenses.

Impact on Insurance Penetration

The exemption is expected to drive higher insurance penetration across India.

• Tarun Chugh, MD and CEO of Bajaj Allianz Life Insurance, called it a landmark decision, noting that life cover is now significantly more affordable.

• Nikhil Chopra, CBO of Medi Assist, added that quality individual health insurance will now reach millions at a reduced cost. He also highlighted that while group coverage remains taxable, insurers and third-party administrators (TPAs) can adopt hybrid models to balance retail and group schemes effectively.

Challenges for Insurance Companies

While customers benefit directly, insurers will face compliance challenges. The GST exemption covers premiums and reinsurance services, but brokerage and commission charges remain taxable.

Since premium income is now GST-free, insurers will not be able to claim Input Tax Credit (ITC) on services they use, and will have to reverse any ITC already availed. This could increase operational costs and administrative complexity.

Industry leaders suggest that companies must ensure these adjustments do not dilute the benefit for policyholders. Transparency in passing on savings will be crucial for maintaining trust.

Why This Reform Matters

For decades, the 18% GST was seen as a hurdle in expanding insurance coverage. Now, with premiums becoming cheaper, families are more likely to secure financial protection through life and health policies.

As Pankaj Nawani pointed out, this change not only reduces the cost burden but also empowers households to make informed choices without worrying about high taxes.

The removal of GST on health and life insurance premiums marks a major policy shift. It is expected to encourage millions of Indians—especially first-time buyers and middle-income families—to opt for insurance, strengthening both financial security and the overall insurance ecosystem in the country.