By News18,Parishmita Saikia
Copyright news18
Finance Minister Nirmala Sitharaman has announced a major relief for policyholders by declaring that all individual health insurance policies, including family floater plans, senior citizen policies, and reinsurance, will now be exempt from GST. Announcing the outcome of the 56th GST Council meeting, Ms Sitharaman also confirmed that all individual life insurance policies, be it term life, ULIPs, or endowment policies, as well as their reinsurance, will likewise be GST-free.
Since the introduction of GST in July 2017, both health and life insurance premiums have been subject to an 18% tax. These changes will be effective from September 22, 2025.
How Much Will You Save?
Let’s consider an example: if you were previously paying Rs 15,000 (including 18% GST) for a health insurance policy worth Rs 25 lakhs, your new premium would be reduced to approximately Rs 12,800. That’s a saving of nearly Rs 2,200.
Similarly, if you had been paying Rs 10,000 for a term insurance policy worth Rs 1 crore, it would now drop to around Rs 8,500, offering a saving of Rs 1,500.
What The Experts Say
Industry experts have praised this move as a bold and progressive step towards making insurance more accessible and affordable for all. “We wholeheartedly thank the government for removing GST on life and health insurance. This move clearly signals the vital role of insurance in the economy.”
According to experts, this reform will ease financial pressure, especially at a time when healthcare costs are rapidly increasing. It is expected to lower entry barriers, encourage early adoption of insurance, and promote a culture of long-term financial planning across the country.
Particularly for term insurance, which is often underutilised despite its importance, this exemption is expected to significantly boost uptake.
The decision is also being hailed as a step forward for financial inclusion, offering protection to vulnerable households and encouraging families to secure their futures.
Insurers believe that this change will:
Reduce premium costs for millions
Encourage product innovation
Strengthen the insurance industry’s outreach, especially in rural and semi-urban areas
Improve the overall resilience of the insurance sector
Health insurance is increasingly seen not just as a financial product, but as a lifeline, a means to shield families from unpredictable medical emergencies and soaring healthcare costs. This policy change comes at a time when India’s healthcare market is on the verge of significant expansion. By removing GST, the government has directly addressed one of the most persistent barriers to affordable, quality healthcare and protection.
Experts view this reform as a historic and visionary measure that balances consumer benefit with industry growth. It aligns with the broader goal of universal health coverage and positions insurance as an essential part of financial and health security in modern India.
