A Long-Awaited Relief for Policyholders.

For years, Indian households have been paying 18% GST on life and health insurance premiums, adding to the financial strain of families trying to protect themselves.Now, in a landmark decision, the GST Council has exempted GST on all individual life and health insurance policies, effective 22 September 2025. This long-discussed reform finally brings relief to millions of policyholders—and marks a big step towards making financial security more affordable and accessible.

• Life Insurance: GST on all individual policies (term, ULIP, endowment) reduced from 18% → 0%.

• Health Insurance: GST on all individual policies (including family floater and senior citizen plans) also reduced from 18% → 0%.

• Reinsurance Premiums: Also exempted.

• Applicability: All new premiums billed after 22 September 2025.

Simply put, premiums for upcoming renewals and new policies will no longer carry GST charges.

Why This Matters for Your Wallet–

Example:

• Base Premium: ₹15,000

• Earlier: ₹15,000 + ₹2,700 (18% GST) = ₹17,700 payable

• Now: Just ₹15,000

That’s a saving of ₹2,700 every year on one policy. Across multiple policies, this saving becomes substantial.

Key Insights You Need to Know:

1.Exemption vs Nil-Rated Supplies

• The government has marked insurance premiums as exempt, not “nil-rated.”

• In “nil-rated” cases, insurers could claim input tax credits (ITC).

• In “exempt” cases, insurers cannot claim ITC on expenses (commissions, rent, marketing).

👉 Policyholders save upfront, but insurers may face higher operating costs—something to watch in the future.

2. Impact on Insurers’ Cost Structures

With ITC disallowed, insurers may face pressure on margins. Some might adjust base premiums later. For policyholders, the immediate benefit is clear: lower payable premiums unless the base premium price increases in the near future.

3. Boost to Insurance Penetration in India

With GST removed, expect:

• More households opting for health cover.

• Increased uptake of term insurance, crucial for family protection.

• Senior citizens finding medical insurance more affordable.

This supports India’s long-term goal of improving insurance inclusion.

How It Strengthens Your Financial Planning:

At Navigators Financial Services, here’s how we see this change benefiting your financial plan:

• Lower Outflow : Higher Savings: Redirect premium savings to SIPs, emergency funds, or debt repayment.

• Upgrade Coverage: Use savings to increase sum assured or add riders.

• Encourage Early Adoption: Lower entry cost = stronger long-term compounding.

• Renewal Review: Ensure your insurer updates billing to reflect zero GST.

• Align With Goals: Free cash can be mapped towards retirement, education, or wealth creation.

Caveats: What to Watch Out For:

• Not all insurers may pass the full benefit immediately—check your renewal invoices.

• Group insurance (corporate policies) may not be included.

• Some insurers could adjust base premiums later due to ITC loss.

Conclusion: Protection Made Affordable.

The exemption of GST on life and health insurance is not just a tax update—it’s a transformative step for household financial security.

For you, this means:

✅ More affordable protection

✅ Greater flexibility in financial planning

✅ A chance to redirect savings into long-term wealth creation

At Navigators Financial Services, we believe insurance is the foundation of financial planning, and this reform makes it easier for families to take that essential step.

👉 If you’d like a personalized plan on how to integrate this change into your financial goals, connect with us at Navigators Financial Services.

About the Author

This article is written by Shalini Raj, Founder of Navigators Financial Services. With years of experience in helping individuals and families simplify money decisions, Shalini’s mission is to empower people with the clarity and confidence to take charge of their financial future.