Purchasing a term insurance policy is one of the most important steps toward financial protection for many families. The cost of your premium matters a lot. Recently, the government introduced a major change: the Goods and Services Tax (GST) on individual life and health insurance premiums has been reduced to 0%.
This reform affects term insurance policy premiums directly. It also changes how you should think about your coverage and premium payments. In addition, if you use platforms like Bajaj Markets to compare term plans, you now have an extra advantage to evaluate.
What is changing for term insurance premiums?
Until now, a typical term insurance policy in India included 18% GST on the premium. From September 22, 2025, individual term insurance plans will no longer carry this tax. In effect, this means that if your base annual premium was ₹10,000, you used to pay ₹11,800 (premium + 18% GST). Now you will pay just the ₹10,000 base premium, which makes your policy more affordable from this date.
However, there are a few important details and conditions to keep in mind.
Why this reform matters?
Reduction in GST on a term insurance policy means a lower cost of protection. For many households, that improved affordability may make it easier to protect dependents. It also aligns with a broader government goal of increasing insurance penetration in the country.
For platforms like Bajaj Markets that compare policy features and costs, this change becomes a useful talking point for policy-seekers. Advice now can highlight how much you will save and how the premium comparison shifts after the tax cut.
What policyholders should check?
Even though the tax on the term insurance policy premium is reduced, the full benefit may not always pass through as you expect. Here are key things to review:
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Confirm that your policy is an individual plan (not a group-insurance or employer-provided scheme). The 0% GST rule is for individual policies only.
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Check the premium due date. If your renewal falls before September 22, 2025, the old tax rate may still apply.
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Ask whether the insurer has increased the base premium or other charges to offset cost impacts (the loss of input tax credit is a factor).
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Use comparison portals (such as Bajaj Markets) to run side-by-side analysis: now that tax is removed, what is the effective premium difference between similar term plans?
Example: How the Reform Impacts Your Premium
Let’s say you are considering a term insurance policy with a base premium of ₹15,000 per year. Previously, with 18% GST, your total payable premium would have been around ₹17,700 annually. After the reform, if the GST is removed or reduced and the base premium remains unchanged, your yearly payment stays close to ₹15,000.
This translates to a saving of approximately ₹2,700 every year. Over a 10-year period, that savings becomes ₹27,000—an amount you could redirect towards building an emergency fund, investing in mutual funds, or enhancing your life cover.
When you compare term insurance plans on a financial marketplace, this difference will be reflected directly in the premium quote. As a result, opting for a higher sum insured or a longer policy duration may now be more affordable than it seemed earlier.
What to do next as a policyholder?
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Visit a comparison portal like Bajaj Markets and filter for term insurance policy options, noting the pre- and post-tax premium difference.
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Review your current policy renewal date. If it falls after the effective date, you should benefit immediately.
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Check with your insurer whether the base premium or coverage has changed since the reform.
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If you were delaying buying a term plan because it felt expensive, now could be a good time to enact your protection plan.
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Keep documentation of your quote, payment receipts, and policy schedule — the reform may help you argue for a refund or adjustment if an overcharge occurred (check insurer policy).
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Understand that while tax is gone, other costs (riders, admin fees) may still vary — compare both premium and policy features.
Limitations to consider
This is a positive change, but two caution points exist:
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Insurers can no longer claim input tax credit on services after this change. That increases their cost base. Some may raise base premiums quietly to compensate over time.
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The zero GST rule does not apply to group insurance plans (such as employer-provided term cover) or to corporate/chapter policies. If your term insurance is through your employer, the old structure may still apply.
Final thoughts
The recent GST reform offers genuine relief to term insurance buyers. With the tax rate now reduced to 0% on individual life and term insurance policies, you can secure the same level of protection at a lower overall cost. This makes it a favourable time to review your cover or consider upgrading it.
Using a comparison platform like Bajaj Markets can help you explore multiple insurers, check premiums transparently, and choose a plan that fits your budget and coverage needs. Simply keeping track of renewal timelines, comparing updated premium quotes, and selecting an individual term policy enables you to maximise the benefit of this tax change.
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