The Government of India has announced great news for all citizens: Individual Insurance will no longer attract an 18% GST. This decision will take effect from September 22, 2025, making health and life insurance more affordable and accessible. The announcement was made through the official Instagram handle of DD News. This move will particularly benefit the middle and lower-income groups, senior citizens, youth, and families.
In this article, we’ll explain in what Individual Insurance is, how the removal of GST will make a difference, who will benefit the most, and what to keep in mind when buying insurance.
What is Individual Insurance?
Individual Insurance is a policy that covers only one person. It provides financial protection against health, life, or other risks. For example, Individual Health Insurance covers expenses like hospitalization, doctor fees, medicines, ambulance services, and OPD costs for a single person. This policy does not cover other family members, meaning each person needs a separate insurance policy.
Benefits of Individual Insurance
- Financial Security: In case of a major illness or accident, the insurance company covers the treatment costs.
- Customization: You can tailor the policy to your specific needs.
- Peace of Mind: Insurance ensures financial support during tough times, reducing stress.
Example: If you have health insurance and need hospitalization, the insurance company will cover the expenses, saving you from dipping into your savings.
What Does GST Removal Mean and Its Impact?
Previously, Individual Insurance (health and life insurance) attracted an 18% GST. This meant that if your premium was ₹10,000, you had to pay an additional ₹1,800 as GST, making the total ₹11,800.
What’s Changed from September 22, 2025?
The government has completely removed the 18% GST on Individual Insurance. Now, you’ll only pay the base premium (₹10,000), saving ₹1,800. This makes insurance cheaper and more affordable for everyone.
Will Insurance Companies Increase Premiums?
With the removal of GST, insurance companies will no longer receive the Input Tax Credit (ITC) benefit, which previously helped reduce their costs. As a result, some companies might slightly increase premiums to cover their expenses. However, experts believe this increase will be minimal, and customers will still spend less overall compared to when GST was applied.
Benefits of GST Removal
- 18% Savings: No extra tax on premiums.
- Affordable Insurance: Buying insurance will now be more cost-effective.
- Increased Adoption: Lower premiums will encourage more people to buy insurance.
- Financial Protection: More people will be safeguarded against health and life risks.
Why Did the Government Take This Step?
The government’s decision is driven by several important reasons:
- Promoting Healthcare: The COVID-19 pandemic highlighted the importance of health insurance. By removing GST, the government aims to encourage more people to buy insurance for financial support during tough times.
- Economic Relief: Cheaper insurance will reduce the financial burden, especially for the middle and lower-income groups.
- Increasing Insurance Reach: The goal is to ensure every citizen has access to insurance, enhancing social and economic security.
- Lessons from COVID-19: The pandemic exposed weaknesses in healthcare systems. Removing GST prepares people for future health crises.
- Economic Growth: Reforms in the insurance sector will boost investment and job opportunities, strengthening the economy.
This step aligns with the Prime Minister’s vision of “security for every Indian,” ensuring health and life insurance reaches more people.
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Who Will Benefit the Most?
The removal of GST will benefit several groups, especially those who found insurance expensive earlier. Let’s see who will gain the most:
- Middle and Lower-Income Groups: The 18% GST savings will make insurance affordable for these groups, who often avoided it due to high costs.
- Senior Citizens: Health insurance is crucial for the elderly, but GST made premiums costly. Now, cheaper premiums will help them with limited incomes (like pensions).
- Youth: Young people can now buy insurance at lower prices, encouraging them to choose policies suited to their needs.
- Families: Families opting for long-term insurance plans will save significantly, allowing better protection for children and elders.
What to Keep in Mind When Buying Insurance?
Buying insurance is a major decision. To choose the right policy, consider these points:
- Read Policy Terms: Understand what’s covered and what’s not, including covered illnesses, hospitalization limits, and claim requirements.
- Know the Claim Process: Learn how to file a claim, the timeline, and required documents to ensure quick assistance when needed.
- Choose a Reliable Company: Select an insurance company with a good claim settlement record and positive customer reviews.
- Premium and Renewal Details: Understand when and how to pay premiums, the policy duration, and renewal terms. Missing premium payments can lead to policy cancellation.
By keeping these points in mind, you can choose a policy that meets your needs and ensures financial security.
External Source (News on AIR)- GST Council Cuts Rates on Insurance, Medicines, Daily Essentials; Major Relief for Common Man, Farmers and Industries
GST for Affordable (PIB)- No GST on Individual Health Insurance
Will GST Be Removed on All Types of Individual Insurance?
Yes, GST will be removed on all Individual Insurance types, including term insurance, health insurance, senior citizen plans, and Unit Linked Insurance Plans (ULIPs), effective from September 22, 2025. However, this exemption applies only to individual life and health insurance, not vehicle, travel, or business insurance.
Will This Benefit Apply Only to New Policies?
No, the benefit applies to both new and existing policies. If you already have an Individual Insurance policy, you won’t pay GST during renewal, reducing your costs.
Will Premiums Reflect the Change Immediately?
Yes, starting September 22, 2025, premiums will exclude GST, immediately reducing your costs. For example, a ₹10,000 premium that previously cost ₹11,800 (with ₹1,800 GST) will now be just ₹10,000.
Conclusion: What Changes with GST-Free Insurance?
| Aspect | Before | Now (GST-Free) |
|---|---|---|
| GST Rate | 18% | 0% |
| Premium (₹10,000) | ₹10,000 + ₹1,800 = ₹11,800 | ₹10,000 |
| Customer Savings | None | 18% (₹1,800 per ₹10,000) |
| Impact | Expensive Premiums | Affordable Insurance |
The removal of GST makes Individual Insurance cheaper and more accessible. This is a huge relief for middle and lower-income groups, senior citizens, youth, and families. The government’s move will boost health and life security, encouraging more people to adopt insurance.
What’s Next? – If you’re planning to buy insurance, now is the perfect time. Check policy terms, claim processes, and the company’s reliability before deciding. This decision is a major step toward ensuring financial and health security for every Indian.
Your Turn! – Are you excited about this decision? Planning to buy new insurance? Share your thoughts in the comments below and spread the word by sharing this article with friends and family to help them benefit from this relief!
