GST On Insurance Premiums To Hit Zero On Sept 22, 2025: Should You Wait To Renew Or Buy Health And Life Insurance?

From September 22, 2025, Goods and Services Tax (GST) on individual health and life insurance premiums would reduce from 18 per cent to zero percent. This decision is going to create a cascading effect on health insurance premiums as insurers would pass on the benefit of the lower GST rate to policyholders in terms of lower total premiums.

If a policyholder currently pays Rs 15,000 (including GST) as a premium, under the recent GST reforms, their outgo will reduce by 18 per cent. This means the new premium will be Rs 12,300, leading to direct savings of Rs 2,700.

“The reduced tax burden makes insurance more affordable and accessible. Lower premiums will encourage more people to stay protected with adequate cover, while existing policyholders benefit from significant annual savings,” says Siddharth Singhal, head- health insurance, Policybazaar.

Premium Cuts Could Range Between 12-15 Per Cent Due To Input Tax Credit Limits

However, although theoretically reduction in total premium could be up to 18 per cent but due to non-availability of input tax credit, the premiums might decrease by 12-15 per cent across all policy types,” says Abhishek Kumar, a Securities and Exchange Board of India (Sebi)-registered investment advisor (RIA), and founder and chief investment advisor of SahajMoney, a financial planning firm.

However, Kumar says that a lot of it would depend on the stance of major players in this segment, as they might absorb higher input costs but still reduce total premiums by 18 per cent to corner the market share, leaving no choice but for other players to follow suit so that they too can fight to retain their market share.

Zero GST On Premiums Applies Automatically At Renewal From Sept 22

As GST is a pass-through cost hence the premiums with zero per cent GST would apply automatically at renewal for policies that renew on or after September 22, 2025, without any special steps required from policyholders. 

“However, this benefit only applies to renewals or new purchases made on or after this date. Existing policyholders who have already paid their premiums, including GST, will not receive refunds,” says Kumar.

While the new GST regime officially goes live on 22nd September, the insurance industry has come together and worked to make zero per cent GST for customers feasible immediately. Health and term insurance are necessities, and there is no reason for families to delay their purchase. “Since underwriting and policy issuance often take time, customers can now buy their policy today without paying GST, with coverage beginning from 22nd September. This ensures that they decide to protect themselves right away while fully benefiting from the government’s reform,” says Singhal.