The government’s latest announcement of No GST on Life and Health Insurance in 2025 has created a buzz among policyholders, insurers, and financial planners. This reform is expected to make insurance policies more affordable and accessible for millions of Indians. By eliminating the Goods and Services Tax (GST) on insurance premiums, both life and health insurance buyers will experience significant cost savings.
This move not only benefits individuals but also strengthens the overall penetration of insurance in India, ensuring better financial security for families. Whether you’re considering a new policy or renewing your existing one, this change can directly reduce your premium burden and make protection plans more attractive.
No GST on Life and Health Insurance – What Does It Mean?
The removal of GST from life and health insurance premiums means that policyholders will no longer pay the additional tax previously applied on their premium amounts. Earlier, a health insurance GST rate of 18% was charged, which increased the cost of policies significantly. Similarly, life insurance and term insurance premiums also attracted GST, discouraging many from opting for adequate coverage.
With this new policy, the gst rate on health insurance premium and gst on insurance premium is effectively zero, providing relief to both families and individuals who rely on health and life insurance for financial security. From September 22, 2025, all individual life and health insurance premiums are fully exempt from GST. To know more, read NDTV article.
GST Rate on Insurance – Previous vs. Current Scenario
Earlier, the insurance gst rate was as follows:
| Type of Insurance | Previous GST Rate | Current GST Rate (2025) |
| Health Insurance | 18% | 0% (No GST) |
| Life Insurance (incl. Term Plans) | 4.5% – 18% (based on plan structure) | 0% (No GST) |
| Group Health Insurance | 18% | 0% (No GST) |
Example: Premium Before vs. After No GST
| Type of Insurance | Base Premium (₹) | Previous GST Rate | Premium with GST (₹) | Premium After No GST (₹) | Savings (₹) |
| Health Insurance | 20,000 | 18% | 23,600 | 20,000 | 3,600 |
| Life Insurance (Term Plan) | 15,000 | 18% | 17,700 | 15,000 | 2,700 |
| Group Health Insurance | 25,000 | 18% | 29,500 | 25,000 | 4,500 |
With the 2025 update, there will now be zero GST on health insurance and no gst on life insurance, bringing down costs drastically. This shift is seen as a measure to promote financial inclusion and make insurance affordable for all income groups. From September 22, 2025, all individual life and health insurance premiums are fully exempt from GST
Impact of New GST Rates on Insurance Policies
The removal of GST from insurance premiums is more than just a tax cut—it directly changes how individuals and families approach financial protection. By reducing costs and improving accessibility, the reform has a wide range of positive effects.
1. Reduced Premium Costs – For policyholders, this is the biggest advantage. For example, a family paying ₹25,000 annually for a health insurance policy earlier had to pay an additional ₹4,500 as GST. With zero GST, the family saves this amount directly.
2. Increased Insurance Adoption – With lower costs, more people may now opt for health coverage and life policies, leading to better overall financial planning.
3. Boost to Health Sector – The removal of gst in health insurance will encourage more individuals to buy protection against rising medical costs, reducing the financial burden on households.
4. Positive Impact on Life Insurance Plans – Policies such as term insurance and savings-linked plans will also see renewed interest since gst on term insurance is no longer applicable.
How Zero GST Affects Leading Insurers
Top insurers like HDFC Health Insurance, Care Insurance, and LIC will see a higher demand for their products. The elimination of gst on lic and other private insurers’ premiums can make products more attractive compared to earlier. For customers, this translates into direct savings and better opportunities to secure a comprehensive cover at a lower price.
Benefits of No GST on Health Insurance for Families
The removal of GST from health insurance premiums is not just about cost savings—it has a direct impact on household budgets and long-term financial security. Families across different income groups can now access affordable protection with greater ease.
- Affordability: With current gst on health insurance being removed, policies become easier to purchase for middle-income families.
- Senior Citizens: High premium policies for older individuals will now be more affordable.
- Group Policies: The elimination of group health insurance gst makes corporate health plans more cost-effective for employers and employees alike.
- Long-Term Value: Policyholders can redirect the saved GST amount toward higher coverage or riders.
Conclusion
The introduction of No GST on Life and Health Insurance in 2025 marks a turning point for the insurance sector in India. By eliminating the additional tax burden, the government has made policies more affordable, encouraging families to invest in protection without hesitation. Whether you are planning to buy a new Life Insurance Plan or upgrade your health cover, this reform ensures that you get more value from your premium.
For policyholders, this is not just about saving money—it is about ensuring financial security, peace of mind, and wider access to quality insurance products.
Frequently Asked Questions (FAQ’s)
1. What was the previous GST rate on health insurance premium?
The gst rate on health insurance premium was 18% before the 2025 update.
2. Is GST still applicable on LIC policies?
Earlier, there was gst on LIC and other life insurance policies, but under the new reform, there is no gst on life insurance.
3. How does this impact term insurance policies?
The change removes gst on term insurance, reducing costs and encouraging more people to secure pure protection plans.
4. Will group health insurance also benefit from this change?
Yes, the removal of group health insurance gst makes such policies more affordable for corporates and employees.
5. Which companies will benefit the most from this change?
Popular providers like HDFC Health Insurance, Care Insurance, and LIC are expected to see higher adoption rates due to reduced costs.