According to recent media reports, the GST Council is considering exempting premiums paid for life and health insurance from GST. This would mean great news for everyone who is buying life or health insurance, especially senior citizens.
A reduction or elimination of GST on health insurance premiums will particularly be beneficial for senior citizens as their health insurance premiums are on the higher side
According to recent media reports, the GST Council is considering exempting premiums paid for life and health insurance from GST. This would mean great news for everyone who is buying life or health insurance, especially senior citizens.
One needs to understand that the GST on life and health insurance premiums is currently at 18 per cent. While we have to wait for the GST council’s decision, even a reduction of GST premiums will bring benefits to policyholders.
Let’s break it down with a simple example. If your base insurance premium is Rs 10,000, the total cost under the current 18 per cent GST would be Rs 11,800. But if GST is reduced to 12 per cent, the total would drop to Rs 11,200. A further reduction to five per cent would bring it down to Rs 10,500. “This cut in costs could encourage more middle-class families to take up life and health insurance, especially since many currently find the premiums too high to fit into their budgets,” says Pankaj Nawani, CEO, CarePal Secure.
A reduction or elimination of GST on health insurance premiums will particularly be beneficial for senior citizens as their health insurance premiums are on the higher side. Senior citizens, who frequently face increasing healthcare needs and rising premiums, will also see substantial advantages from GST-free health insurance. “As insurance costs tend to rise with age, this reform will alleviate the financial burden for many seniors, particularly those relying on limited pensions or family support. More accessible premium rates will enable them to obtain essential healthcare coverage without straining their household budgets,” says Sharad Bajaj, Chief Operating Officer (COO), InsuranceDekho, an insurtech platform.
Those who were not taking insurance because of high premiums would be encouraged to take insurance. “Also, users will be able to access higher coverage while paying the same premium, allowing for enhanced financial protection without additional cost burdens,” adds Bajaj.
“Customers can also think of increasing their coverage or buying additional top-up plans with the money saved,” says Sumit Bohra, President, Insurance Brokers Association of India (IBAI).
The Case For GST However, here’s the tricky part—GST helps fund important social welfare schemes, which makes it difficult to completely remove it from all types of insurance policies.Now, removing GST entirely sounds great in theory, but in practice, it’s not very likely. Programs like Ayushman Bharat, which provides health insurance to millions of underprivileged people, depend on GST revenue for funding. “That’s why we’re more likely to see a partial reduction rather than a full exemption. While a zero GST rate seems ideal, it could lead to higher base premiums for consumers and less money for essential social programs,” says Nawani. So, while we wait for the GST Council’s decision, let’s hope for a win-win—cheaper insurance and more money in your pocket.