From September 22, 2025, a significant change is coming to the insurance industry. The 18% GST currently applied to individual life and health insurance premiums will be removed. This move is designed to make insurance more affordable. For example, a ₹1,000 premium that previously cost ₹1,180 with tax will now be just ₹1,000.
However, there’s a crucial detail to be aware of: insurers will no longer be able to claim Input Tax Credit (ITC). ITC is the credit they received for the GST they paid on business expenses like agent commissions and administration costs. This loss of ITC could prompt some companies to slightly increase their base premiums to make up for the hit, which might reduce the total savings for customers.
What This Means for You
If Your Policy Is Due for Renewal Before September 22:
Don’t wait! Renew your policy on time. Waiting for the GST cut might seem tempting, but the risk far outweighs the potential savings. If you delay, you could lose critical benefits like your no-claim bonus, renewal discounts, and continuous coverage. A lapse in your policy means you lose the benefits you’ve built up over time.
If You’re Planning to Buy a New Policy:
Consider waiting until after September 22. New policies will likely be cheaper from the start. You can also use the free-look period to your advantage. If you buy a policy just before the change, you can use this period to switch to a new, cheaper policy without facing any penalties.
Beyond the Price Cut
The GST exemption isn’t just about savings on premiums. It also makes traditional savings-focused products like endowments and ULIPs more appealing. With less of your premium going to tax, a larger portion is invested, which could lead to better long-term returns.
The full impact of this change depends on how insurance companies adjust their pricing. While the goal is to make insurance more affordable, the final benefit to you will be determined by how transparently insurers pass on these savings.