New Delhi: Starting 22nd September 2025, GST on individual life and health insurance policies will no longer apply, marking a major relief for millions of policyholders across the country. This move is set to reduce the cost burden of essential coverage and expand access to financial protection.
The exemption covers a wide range of products, including term life policies, unit-linked insurance plans (ULIPs), endowment plans, family floater health insurance, senior citizen health plans, and even their reinsurance components.
To understand the impact, consider this example explained by Dr. Sabine Kapasi, CEO of Enira Consulting Pvt Ltd, Founder of ROPAN Healthcare, and UN Advisor. Suppose someone pays an annual premium of Rs 20,000 for health insurance. Earlier, with 18 percent GST, the total outgo rose to Rs 23,600. With the exemption, the policyholder pays only the base premium of Rs 20,000—a direct saving of Rs 3,600, or nearly 15 percent less. For middle-income families balancing tight household budgets, such savings could mean the difference between staying covered or dropping insurance altogether.
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“Much like other countries, universal health coverage remains a challenge in India. About 30 percent of the population—roughly 40 crore people—still lack any form of insurance. The 14 percent annual rise in medical costs only worsens the gap. Families not only face higher premiums but have also been forced to pay taxes on them,” said Dr. Kapasi. She noted that for many middle-class households, health insurance and basic living expenses directly compete, and the GST exemption helps break this barrier by making premiums more affordable.
The government has already expanded access for the economically weaker sections through schemes like Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) and Rashtriya Swasthya Bima Yojana (RSBY). Removing GST complements these efforts by making private insurance more viable, particularly for the “missing middle”—households that earn too much to qualify for subsidies but struggle to afford private coverage. As Dr. Kapasi pointed out, out-of-pocket health expenses still account for nearly 45% of total health spending in India, among the highest in the world.
By eliminating GST, the government is addressing a key affordability barrier. Combined with other measures such as potential hikes in Section 80D tax deductions and efforts to control medical inflation, this reform could make insurance more accessible, reduce financial strain, and bring India a step closer to universal healthcare coverage.
While challenges persist, the removal of GST on insurance premiums is undeniably a positive step. It lightens the financial load on families, encourages wider adoption of health and life insurance, and strengthens the nation’s path toward inclusive healthcare security.
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