In India, health expenses are one of the biggest reasons families fall into debt. A sudden hospitalization or critical illness can wipe out years of savings, leaving households financially vulnerable. Yet, despite knowing the importance, many people hesitate to buy health and life insurance because premiums often feel like a heavy financial burden. Recently at The 56th Meeting of the GST Council, the Finance Minister of India; Hon’ @Nirmala Sitharaman made some announcements that will change the way you see insurance.
22nd September 2025 onwards, GST on health and life insurance premiums will drop from 18% to 0%! What does this mean? Premiums will now be more affordable. Now, buying insurance is within the reach of millions of Indians who previously delayed or skipped getting covered due to high costs.
This isn’t just a tax relief; it’s a chance to rethink how we prioritize protection. With premiums now lighter on the pocket, there’s no better time to secure:
- Your health: so that medical bills don’t disrupt your financial goals.
- Your family’s future: ensuring stability even during uncertain times.
- Your peace of mind: knowing you’re protected against life’s unpredictability. Insurance has always been about more than just policies; it’s about building strength for yourself and your loved ones. Now, with 0% GST, that is easier to achieve than ever before.
Key Impacts & Transformations
- Affordability Boost : In Tier-2 and Tier-3 cities, families often hesitate to buy health insurance because premiums feel like a heavy burden. Removing the 18% GST directly reduces this cost, making coverage more affordable. As GST premiums drop by 18%. First-time buyers and young families who are usually on tighter budgets, a reduction in the cost of premiums makes it easier to buy their first health or life insurance plan.
- Financial Inclusion: Gig workers, informal sector employees, and underserved communities have often stayed away from insurance because of their high costs. With premiums now lower, protection becomes easily accessible. The government has instructed insurers to pass on the full benefit of this GST exemption to both new and existing policyholders.
- Shift in Consumer Behaviour: When premiums drop, consumers tend to take protection more seriously: choosing better life cover, combining family floater health plans, and considering term insurance. For young professionals, insurance now becomes easier to prioritize as an essential part of financial planning.
- Insurance Penetration & National Numbers: As per Times of India, India’s insurance penetration (premiums as % of GDP) was 3.7% in FY 2023-24, with life insurance at ~2.8% and general insurance at ~1.0%. According to the Allianz Global Insurance Report 2025, the global average is about ~7% penetration, so there’s a large gap here. This policy shift has real power to drive India closer to global benchmarks.
- Industry Innovation & Opportunity: First-time buyers want simple, affordable cover. Smaller sum insured, family floaters, and hassle-free digital onboarding make insurance easier to buy and easier to trust. Market competition could pivot from brand or commission-based to service quality, ease, and claims settlement speed. Market competition may shift. Focusing on service quality, ease of use, and speed of claims settlement, rather than brand or commission.
Long-Term National Benefits.
- Households with better insurance coverage are less likely to be pushed into poverty due to medical emergencies.
- Reduced pressure on public welfare or government-funded healthcare subsidies.
- Improved health outcomes, more preventive care, and fewer delays in treatment because cost is less of a barrier.
Challenges & What’s next.
- Trust Deficit: Insurance has long carried a perception problem. People worry about hidden conditions or not getting promised savings. This new policy shift needs transparent communication.
- Awareness Gap: Many people are still unaware of the GST removal, especially in Tier-2 and Tier-3 cities. Lack of awareness, uptake may remain slow.
- Sustaining Momentum: Lower premiums may attract first-time buyers, but consistent service, simplified policies, and claims support will be key to keeping them insured for the long term.
Conclusion.
This GST policy shift is more than a tax tweak. It allows you to plan life better and make better financial decisions while not worrying about getting insurance. If leveraged right, it could reshape how Indians protect their health, their families, and their financial futures.
Now is the time to act. With premiums becoming more affordable, there’s no better moment to secure your health. Protect yourself, your loved ones, and your future with Shift Risk Insurance Brokers Limited
