Insurance Gets Cheaper Under GST 2.0, Why You Should Buy Now Before Prices Go Up
GST exemption on life and health insurance premiums makes policies cheaper, boosting affordability and encouraging wider coverage. Experts, however, warn that insurers may soon hike prices or trim distributor commissions to absorb input tax credit (ITC) losses. Consumers can lock in lower rates by buying policies now.
- Republic Business
- 2 min read
;'%3e%3cpath%20d='m8,15.99c4.41,0,7.99-3.58,7.99-7.99S12.41,0,8,0,0,3.59,0,8s3.58,7.99,7.99,7.99Z'%20style='stroke:%23fff;%20stroke-miterlimit:10;%20stroke-width:.02px;'/%3e%3cpath%20d='m3.08,3.37l3.82,5.11-3.84,4.15h.87l3.37-3.64,2.72,3.64h2.94l-4.04-5.39,3.58-3.87h-.86l-3.1,3.35-2.5-3.35h-2.94Zm1.27.64h1.35l5.97,7.99h-1.35l-5.97-7.99Z'%20style='fill:%23fff;'/%3e%3c/g%3e%3c/svg%3e){kind=small}
Buying life and health insurance has just become cheaper. The government’s GST 2.0 reform has fully exempted individual life insurance and retail health insurance premiums from Goods and Services Tax (GST), which previously stood at 18% for most products.
“The removal of GST on individual life and health insurance is a step in the right direction for making insurance affordable and addressing the issue of lack of coverage or under-coverage,” Emkay Global said in its latest sector report.
This means consumers purchasing term plans, health policies, ULIPs (Unit Linked Insurance Plans), or endowment/savings plans will immediately benefit from lower premiums.
Before & After: GST Rates on Insurance Products
| Insurance Product | Old GST Rate | New GST Rate |
| Term Insurance | 18% | Exempt |
| ULIPs | 18% | Exempt |
| Endowment/Savings Plan (1st Year) | 4.5% | Exempt |
| Endowment/Savings Plan (Renewals) | 2.25% | Exempt |
| Single Premium Annuity | 1.8% | Exempt |
| Riders (Critical Illness, etc.) | 18% | Exempt |
| Retail Health Insurance (Individual, Family Floater, Senior Citizen) | 18% | Exempt |
| Government Schemes (PMJJBY, Ayushman Bharat, etc.) | Nil/Exempt | Exempt |
Hidden Cost Pressures Ahead
While this move is consumer-friendly, analysts caution that insurers will still pay GST on input services such as commissions and operating expenses but will no longer have premiums to set off input tax credit (ITC) against.
“This means insurers may reprice products and adjust distributor commissions over the coming quarters,” said Avinash Singh, Senior Research Analyst at Emkay Global. “ULIPs, which already operate on low margins, will feel the most heat, and some of the cost benefit may narrow as insurers make these adjustments.”
Prices May Rise by Year-End
Consumers may not notice higher prices immediately. “For a large part of September-October 2025, the prices of most life and health insurance products are likely to be almost similar to those in August,” Emkay noted. But by Q4 FY25, repricing and margin adjustments are expected to kick in, potentially leading to higher premiums.
Consumer Takeaway: Act Now
Financial planners recommend consumers act quickly to lock in lower premiums. Buying term and health policies now allows policyholders to benefit from the exemption before any future price revisions.
“This window offers consumers a unique opportunity to get more value for money on their insurance premiums,” Singh added.
Advertisement
Big Insurers Best Positioned
Despite near-term margin pressure, large players like SBI Life, HDFC Life, and Max Financial are expected to handle the transition better due to their scale and distribution strength. Emkay Global has a Buy rating on SBI Life and HDFC Life and an Add on Max Financial, ICICI Prudential, and LIC.