Since September 22, 2025, individual health insurance, individual life insurance (including term, endowment and ULIPs), family floater plans and senior citizen health plans attract 0% GST. Employer and group health insurance, group term and credit life insurance, and motor insurance remain at 18%. The exemption reduced premiums on individual products and drove a 1.5x increase in term insurance purchases, according to Policybazaar data reported by Fortune India. But the exemption interacts with Section 80D in ways that most policyholders do not check.
What the exemption covers
The GST exemption applies to individual policies sold directly to policyholders. This includes individual term life insurance, individual endowment plans, individual ULIPs, individual health insurance, family floater plans and senior citizen health plans. The common thread is that the policy is issued to an individual, not to an employer or group.
The exemption does not apply to group or employer-purchased policies. Employer group health insurance, group term insurance and credit life insurance (the cover bundled with bank loans) all remain at 18% GST. Motor insurance, both comprehensive and third-party, also remains at 18%.
The premium impact
The numbers tell the story. Policybazaar data shows that the GST exemption has driven a 1.5x increase in term insurance purchases. NRI buyers opting for Rs 3 crore plus covers rose 35%. Women adoption grew 27% faster than men. The 18 to 25 age group recorded 20% higher growth than other age groups. These are not marginal effects. The premium reduction made term insurance meaningfully cheaper, and customers responded by buying more cover, not just paying less.
For a 30-year-old buying a Rs 1 crore term plan, the GST exemption typically saves between Rs 2,000 and Rs 4,000 annually depending on the insurer and plan features. Over a 30-year policy term, that adds up to Rs 60,000 to Rs 1,20,000 in total savings. For health insurance, the savings are proportionally smaller on annual premiums but compound over repeated renewals.
Section 80D: the other half of the equation
This is where most policyholders leave money on the table. Section 80D of the Income Tax Act provides a deduction for health insurance premiums paid, up to Rs 25,000 for individuals under 60 and Rs 50,000 for senior citizens. This deduction is independent of the GST exemption. You get the lower premium from the GST exemption AND the tax deduction from Section 80D.
The critical detail is what you can claim under 80D. The deduction is available on the premium paid, including GST. But since individual health insurance now attracts 0% GST, the premium you pay is already GST-free. You can still claim the full premium amount under 80D. There is no reduction in the 80D deduction because the GST component is zero. The exemption and the deduction are additive, not substitutive.
For employer group health insurance, the situation is different. The employer typically pays the premium, which includes 18% GST. The employee cannot claim 80D for premiums paid by the employer. If you top up your employer cover with an individual policy, the individual policy premium qualifies for 80D, and it is GST-free.
What you should check
First, check your payment date, not your renewal date. The GST exemption took effect from September 22, 2025. If your renewal fell before that date and you paid before September 22, the premium included GST. If you paid on or after September 22, the premium should be GST-free. Some insurers applied the exemption pro-rata; others did not. Check your payment receipt for the GST component.
Second, check whether your policy is classified as individual or group. If you buy health insurance directly from an insurer or through an aggregator, it is individual and GST-free. If your employer provides it, it is group and GST applies at 18%. The distinction matters for premium cost and for 80D eligibility.
Third, check your 80D claim. If you pay individual health insurance premiums, you can claim the full amount under 80D, up to the applicable limit. If your employer provides group cover and you also hold an individual policy, you can claim 80D only on the individual policy premium, not on the employer contribution.
Fourth, check motor insurance. Motor insurance remains at 18% GST. There is no exemption, and there is no 80D deduction for motor insurance premiums. If you see a motor insurance quote without GST, it is incorrect.
Maximising both savings
The optimal approach is straightforward. Buy individual health and life insurance to get the GST-free premium. Claim 80D on the individual health insurance premium. If your employer provides group cover, treat it as base protection and top up with an individual super top-up if needed, since the super top-up premium is GST-free and 80D-eligible.
For term life insurance, the GST exemption makes it cheaper, and the death benefit is tax-free under Section 10(10D). There is no 80D deduction for term life premiums, but term premiums qualify under Section 80C up to the Rs 1.5 lakh aggregate limit. The GST exemption and 80C together make term insurance the most tax-efficient protection product available.
Watch next
The GST exemption on individual insurance is currently permanent. There is no sunset clause. However, the GST Council reviews rates periodically, and any future change could restore the 18% rate on individual products. The practical defence is to lock in long-term term insurance and health insurance while the exemption holds. For health insurance, the renewal date determines the GST treatment, so setting a calendar reminder 30 days before renewal ensures you can compare quotes and lock in the GST-free rate if the exemption is still in force.