Table of Contents
Overview
At the 56th GST Council meeting led by Union Finance Minister Nirmala Sitharaman, the removal of the 18% GST on individual health and life insurance policies was announced. This GST changes aim to make insurance more affordable and reduce financial pressure, especially as medical costs continue to rise.
Major Highlights:
GST rate on Individual Health and Life Insurance premiums reduced from 18% to 0%
Applies to retail policies including family floater, senior citizen, and personal accident plans
Effective for new purchases and renewals from September 22, 2025
Premiums become significantly cheaper, increasing access and coverage
Though Group Insurance is not covered by this exemption and continue to attract 18% GST.
How Buyers will benefit from the GST Changes
| Premium Component | Before GST Exemption | After GST Exemption | Benefit to Policy Buyer |
|---|---|---|---|
| Base Premium | ₹20,000 | ₹20,000 | No change in base policy price |
| GST (18%) | ₹3,600 | ₹0 | Direct savings of ₹3,600 on GST |
| Total Premium Paid | ₹23,600 | ₹20,000 | Pays ₹3,600 less overall |
GST Change on Individual vs Group Insurance
| Insurance Type | Earlier GST | Now |
|---|---|---|
| Individual Health Insurance | 18% | 0% |
| Individual Life Insurance | 18% | 0% |
| Group Health Insurance | 18% | Unchanged |
| Group Life Insurance | 18% | Unchanged |
| Other General Insurance (Motor, Fire, Home, Liability) | 18% | Unchanged |
Why Group Insurance Retains GST?
- Group Health and Life Insurance policies still carry an 18% GST on premiums.
- Group Insurance policy treated as commercial contracts between insurers and corporate entities.
- The exemption only applies to individual retail insurance policies, such as personal health, family floater, senior citizen, and individual life insurance plans.
- This means corporate employer-sponsored group insurance policies are not eligible for GST relief at this time.
- Input Tax Credit (ITC) provisions still exist for insurers on group policies, affecting pricing models.
- Group insurance’s bulk-risk coverage and administrative frameworks distinguish it from individual retail plans.
The Value Beyond GST in Group Health Insurance
1. Immediate Coverage Without Medical Tests
Group insurance provides instant coverage for all employees without health screenings. Individual policies require medical tests and often exclude pre-existing conditions for 2-4 years.
2. True Cost Efficiency Through Risk Pooling
Even with 18% GST, group insurance costs significantly less per person than individual policies due to risk sharing and volume discounts.
3. Comprehensive Family Coverage
Group policies cover employee families at minimal extra cost. Individual policies require separate purchasing and underwriting for each family member.
4. Superior Claims Experience
Group insurance offers dedicated relationship managers, faster approvals (24-48 hours vs 7-15 days), and cashless treatment at more hospitals.
5. Coverage for High-Risk Employees
Group insurance protects employees over 55 or those with chronic conditions who might be rejected by individual insurers.
6. Predictable Budgeting and Cost Control
Fixed annual premiums with no surprise increases based on individual employee claims history or age-related premium jumps.
7. Employee Satisfaction and Retention
Shows company care for employee welfare and creates security. 78% of employees consider health insurance the most important benefit after salary.
Conclusion
The GST Changes on individual health and life insurance premiums marks major progress toward affordable insurance in India. Corporates must navigate this landscape strategically to balance cost efficiency with comprehensive employee protection and satisfaction.
By understanding the nuances of GST on group insurance and adapting their benefits strategies accordingly, organisations can deliver value-driven insurance solutions effectively in the new GST era.
What impact do GST changes have on insurers’ pricing and tax credits?
Insurers lose Input Tax Credit (ITC) benefits on individual policies due to GST exemption, which may result in base premium increases over time to balance costs.
When is the best time to buy individual health or life insurance post-GST changes?
Does the GST exemption apply to group health and life insurance policies?
No, group health and life insurance policies continue to attract 18% GST. The exemption only applies to individual retail insurance policies.
What major GST changes were introduced for health and life insurance premiums in 2025?
From September 22, 2025, GST on individual health and life insurance premiums was reduced from 18% to 0%, making them more affordable for Individual Health and Life policy buyers.
