Tax is one of the components of an insurance premium that is seldom spoken about, but has an outsized effect on what ends up being paid. GST used to be added to insurance premiums; when the rate on a certain product changed, the figure actually paid differed considerably.
Understanding which types of cover attract GST, and the magnitude of change, can help reduce the figure by 18%, making it crucial to ensure one is not paying more than they should. A reliable Insurance App ensures that all insurance policies are in one place, alongside the premium and payment due dates.
How the Change Affects Your Premium?
Since GST is applicable on the premium paid by an insured, any fluctuation in this will have a direct impact on it.
-
Earlier 18% Burden:
Individual health and life insurance used to attract an 18% GST, significantly affecting the yearly cost of cover. At ₹30,000, an additional ₹5,400 was charged, bringing it to ₹35,400. This made budgets stretch thinner for families with multiple policies.
-
The Revised Treatment:
From 22 September 2025, the 18% GST on retail individual and family floater health insurance policies and individual life insurance policies were waived. In other words, the sum assured was now up to 18% lower at the point of renewal for these kinds of policies.
-
Saving May Differ Slightly:
The exemption meant that input tax credit could no longer be claimed by insurers, resulting in some upward revisions in cost. Be sure to compare the final payable instead of the tax rate.
How This Impacts Various Policies?
Different insurance products are impacted differently by tax changes, and it helps to understand the effect for one’s own kinds of cover.
- Renewals for individual and family floater health cover are cheaper by up to 18%. While this would be useful for anyone, senior citizens who have to pay more tend to benefit the most. As health insurance policies are often renewed near the due date, the amount and also the due date help you understand the new figure easily.
- Personal accident and travel cover products are purchased as add-ons with other types of insurance, where the waiver makes them affordable.
- Term, endowment and ULIP life and term insurance, bought as individuals, are now up to 18% cheaper. It helps to increase the sum assured, where income permits.
- Motor insurance, on cars and bikes, continues to attract tax and hence the rate is unlikely to change, for now. These can be kept apart when checking renewal amounts so that the saving in others is not overstated.
How to Make the Saved Amount Work Harder?
It is best to utilise the savings in a way that improves cover. Here are ways in which some of the saved money can be channelled:
-
Improving the Sum Assured:
When the sum insured (the cover amount) is low, the money saved can be used to increase it. It is a fact that medical inflation vastly outpaces general inflation, so an increased coverage amount is more important than reducing the premium amount.
-
Covering Gaps in Protection:
Life and health insurance are not bought by everyone, but those without it may see personal accident and travel cover as expensive. The lower cost now makes it viable to add it to one’s repertoire, and a good place to start.
-
Keeping Policies Active:
Many people have life cover policies that they cancelled some time ago, without understanding the implications. These can be reinstated if there is a genuine need, although it may involve higher cost and lower acceptance.
How to Cross-Verify the Savings?
It is possible to overlook whether GST is applicable in a policy one holds, so here are some precautionary measures to take before paying.
-
Reading the Breakdown of the Premium Carefully:
When a renewed premium is sent out, it should break down the basic premium and any taxes. In case GST is indicated on individual health insurance, it is best to check with the insurer why this is so.
-
Comparing the Overall Figure:
One policy may have a base premium slightly higher than others on the market. Adjustments such as the tax revision may make it slightly lower overall. It is best to compare policies, along with factors such as the waiting period for claims.
-
Keeping All Policies in One Place:
A reliable Insurance App makes it possible to keep an eye on health insurance policies and pay the premium digitally, along with a confirmation message. Verification becomes easier with digital documents instead of sifting through hundreds of papers.
Conclusion
The kind of cover influences the overall savings, the manner in which it is calculated and the final verification done before paying. Utilising the difference is the best thing one can do with the reduction, and it helps most to use this towards covering all bases.
The Bajaj Finance App helps one to choose from various kinds of insurance – life, health, motor and pocket- from different companies. Keeping track of one’s health insurance policies and paying the premium with a confirmation message is possible via the app. With insurance sorted, it is possible to utilise some of the money saved towards improving or adding to one’s coverage.
