On September 22, 2025, Every Term Insurance Policy in India Got 15% Cheaper. Most Buyers Do Not Know Yet.
On September 22, 2025, the GST Council removed GST from individual term insurance policies. The rate dropped from 18% to 0%.
A policy that cost Rs 11,800 with GST now costs Rs 10,000. A policy that cost Rs 17,700 now costs Rs 15,000. Over a 30-year policy, the savings on a Rs 30,000 base premium compound to Rs 1,62,000 — returned to the policyholder, not the government.
This is not a proposal or a budget announcement. It has been law since September 22, 2025.
In the same period, IRDAI launched Bima Sugam — the government’s own insurance marketplace with a 1.4% commission cap versus the 5.5% that private aggregators charge. Together, these two developments represent the largest structural reduction in term insurance effective cost in Indian regulatory history.
This article tells you exactly how much you save, who it does and does not apply to, how Bima Sugam works and where it falls short, and what practical steps to take right now.
The GST Exemption: What Changed and Why
What the Law Said Before September 22, 2025
Term insurance premiums were subject to 18% GST under the Goods and Services Tax framework. This GST applied to:
- The base insurance premium
- All riders (critical illness, accidental death benefit, waiver of premium on disability)
- Premium for TROP (Term with Return of Premium) plans
Example: A Rs 10,000 base premium policy cost the buyer Rs 11,800 — with Rs 1,800 going to the government as GST.
What Changed
The GST Council recommended, and the government implemented, a full exemption for individual term life insurance policies. Effective September 22, 2025:
- GST on individual term insurance: 0%
- GST on all attached riders: 0%
- GST on group term insurance (employer-provided): still 18%
- GST on endowment plans, ULIPs, and investment-linked policies: 18% unchanged
The exemption is narrow and specific: it covers only pure term insurance purchased by an individual directly. Group policies and investment-linked products retain the old rate.
Exact Savings in Rupees
These are not estimates. These are arithmetic calculations based on the 18% to 0% reduction.
Annual Savings by Premium Band
| Annual Base Premium | Previous Annual Cost (with 18% GST) | Current Annual Cost | Annual Saving |
|---|---|---|---|
| Rs 8,000 | Rs 9,440 | Rs 8,000 | Rs 1,440 |
| Rs 10,000 | Rs 11,800 | Rs 10,000 | Rs 1,800 |
| Rs 12,000 | Rs 14,160 | Rs 12,000 | Rs 2,160 |
| Rs 15,000 | Rs 17,700 | Rs 15,000 | Rs 2,700 |
| Rs 20,000 | Rs 23,600 | Rs 20,000 | Rs 3,600 |
| Rs 25,000 | Rs 29,500 | Rs 25,000 | Rs 4,500 |
| Rs 30,000 | Rs 35,400 | Rs 30,000 | Rs 5,400 |
Lifetime Savings (30-Year Policy)
| Annual Base Premium | Lifetime Saving (30 years) | Lifetime Saving (20 years) |
|---|---|---|
| Rs 10,000 | Rs 54,000 | Rs 36,000 |
| Rs 15,000 | Rs 81,000 | Rs 54,000 |
| Rs 20,000 | Rs 1,08,000 | Rs 72,000 |
| Rs 30,000 | Rs 1,62,000 | Rs 1,08,000 |
These savings apply to new policies purchased after September 22, 2025, and to all renewal premiums after that date. They do not apply retroactively to premiums already paid.
Riders Are Also Exempt
A frequently missed detail: all riders attached to an individual term policy are also GST-exempt. If you have a critical illness rider adding Rs 2,000/year to your base premium, that Rs 2,000 also loses its Rs 360 GST load. The effective saving applies to the full premium — base + riders — not just the base policy.
Who the Exemption Does NOT Apply To
Group Term Insurance (Employer-Provided Cover)
If your employer provides group term insurance as a workplace benefit and deducts the premium from your CTC, that policy is subject to 18% GST. Group insurance is a B2B contract between the employer and the insurer — not an individual retail policy. The exemption does not cover this transaction.
Practical implication: The Rs 5–20 lakh group cover your employer provides is not getting cheaper. If you rely primarily on employer-provided cover, you are still paying 18% GST on that component (borne either by you or your employer, depending on the scheme structure). This is an additional reason to buy individual term insurance — beyond the well-known portability argument.
ULIPs, Endowment Plans, Money-Back Policies
These are investment-linked life insurance products, not pure risk cover. Their premiums continue to attract 18% GST. The exemption is specifically for pure protection — term insurance whose sole benefit is a death payout.
If an insurance agent is telling you that GST exemption applies to your ULIP, they are wrong. Verify your specific product category before assuming the exemption applies.
Annuities and Pension Plans
These continue at their existing tax treatment. The September 2025 exemption covers only individual term life insurance.
How to Verify Your Insurer Has Applied the Exemption
For New Policies (Purchased After September 22, 2025)
Your quotation and policy schedule should show your premium with no GST line item — or explicitly state 0% GST. If you receive a policy document showing 18% GST on a purchase date after September 22, 2025, do not pay without clarification.
Steps:
- Call the insurer’s customer care and reference the GST Council notification of September 2025
- Ask for a corrected premium notice
- If the insurer is unresponsive: file a complaint at IRDAI’s Bima Bharosa portal (bimabharosa.irdai.gov.in)
For Renewal Premiums
Your renewal notice for premiums falling after September 22, 2025 should show no GST. Most insurers updated their systems automatically — the IRDAI mandate was unambiguous. However, some smaller insurers with older billing systems may not have updated correctly.
If your renewal invoice for any payment after September 22, 2025 shows a GST component:
- Do not assume it is an error in your reading — check the invoice header for the GST rate explicitly stated
- Contact the insurer before paying — GST incorrectly collected becomes complicated to refund
- If the insurer insists on charging GST post-September 22, 2025, escalate to IRDAI immediately
Bima Sugam: The Commission Structure That Will Eventually Make Insurance Cheaper
What Is Bima Sugam
Bima Sugam is a digital marketplace for insurance built and owned by the insurance industry under IRDAI supervision. Think of it as a regulated, non-profit version of PolicyBazaar.
It covers:
- Life insurance (term plans, endowment, ULIPs)
- Health insurance
- Motor insurance
- Property insurance
From a single account, buyers can:
- Compare policies from every IRDAI-registered insurer
- Purchase policies online
- Store all their policies in a single digital repository
- File and track claims
- Update nominations and contact details across all policies
The Commission Difference
This is the number that matters for term insurance buyers:
| Distribution Channel | Commission Structure | Impact on Your Premium |
|---|---|---|
| Agent (offline) | 15–30% of Year 1 premium | Highest effective cost |
| PolicyBazaar / Coverfox | ~5.5% of annual premium | ~Rs 660/yr on a Rs 12k policy |
| Paisabazaar | ~5% of annual premium | ~Rs 600/yr on a Rs 12k policy |
| Direct insurer portal | 0% intermediary commission | Lowest currently |
| Bima Sugam | 1.4% regulatory cap | ~Rs 168/yr on a Rs 12k policy |
The structural implication: If Bima Sugam achieves the same market penetration as PolicyBazaar, insurance premiums distributed through it should structurally be Rs 400–500/year cheaper per policy compared to existing aggregators. Over a 30-year policy:
- PolicyBazaar commission on Rs 12,000/year premium: Rs 660/year × 30 years = Rs 19,800
- Bima Sugam commission at 1.4% cap: Rs 168/year × 30 years = Rs 5,040
- Difference: Rs 14,760 per policy, compounding over the term
The Investment Behind Bima Sugam
IRDAI originally estimated the platform would cost Rs 85 crore. The actual build cost escalated to a Rs 500 crore initiative. Phase 1 went live in December 2025. The platform was notified under the IRDAI (Bima Sugam — Insurance Electronic Marketplace) Regulations, 2024.
PolicyBazaar’s response has been to accelerate its own advisory offerings — positioning service quality rather than commission as its differentiator. In a market where 93% of online insurance distribution flows through one aggregator, the Bima Sugam launch represents a structural disruption that will take 18–36 months to fully price in.
Where Bima Sugam Falls Short Today
It is new. December 2025 is very recent. As of mid-2026, there is essentially no track record of:
- Claim support quality through the platform
- Post-purchase service (nominee updates, address changes, ECS mandates)
- Complaint resolution
- Insurer participation breadth (not all insurers may be fully integrated)
Advisory depth is unproven. PolicyBazaar and Ditto both offer human advisory support to help buyers compare plans. Bima Sugam’s advisory layer is digital-first — for a complex insurance decision involving health disclosures and occupation-specific underwriting, digital-only guidance is likely insufficient.
The commission saving may not yet be passed through. A 1.4% commission cap does not automatically make the policy 4.1% cheaper than through PolicyBazaar. Insurers may maintain the same pricing regardless of distribution channel — especially in the early months before competitive pricing dynamics take hold.
Recommendation for 2026: Use Bima Sugam to:
- Check that the quote you are getting elsewhere is consistent with what Bima Sugam shows for the same policy
- Access policy storage and nomination management functions
- Keep a login active so you are positioned to benefit as the platform matures and competitive pricing emerges
Do not use Bima Sugam as your primary buying platform until it has 12–18 months of consumer-facing track record.
The Insurance Laws Amendment Act 2025: What Else Changed
The GST exemption and Bima Sugam did not happen in isolation. The broader insurance regulatory environment underwent its most significant overhaul in decades in 2025.
The Sabka Bima Sabki Raksha Act
Passed by Parliament in December 2025, effective February 5, 2026. Key provisions relevant to term insurance buyers:
Regulatory consolidation: IRDAI replaced 37 existing regulations with 7 consolidated regulations. The intent is to shift from prescriptive rule-based oversight to principle-based regulation — giving insurers more flexibility in product design and pricing while maintaining consumer protection floors.
Commission flexibility: The consolidated regulations give insurers more flexibility in setting agent and aggregator commissions — they can now vary commissions within an overall expense cap rather than following prescriptive insurer-type-specific limits. This is the mechanism that could either increase or decrease the commission-to-premium relationship over time.
FDI opening: The Act allowed up to 100% FDI in insurance companies (previously capped at 74%). This invites more foreign capital into Indian insurance — which typically means more competitive pricing and better claims technology over the medium term.
Faster regulatory approvals: IRDAI approval timelines for new insurance products are reduced. This allows insurers to bring innovative term products to market faster.
Consumer protection floors: Mandate for standardised claim forms, 30-day claim settlement timeline for standard claims (non-investigated), and digital-first communication for all policyholders.
Why Right Now Is the Best Time to Buy Term Insurance in India
Combining the GST exemption, Bima Sugam launch, and the regulatory reforms:
| Factor | Impact on Term Insurance Cost | Effective Since |
|---|---|---|
| GST reduction 18% → 0% | -15.25% on total premium | September 22, 2025 |
| IRDAI commission reforms | Marginal — direction unclear yet | February 2026 |
| Bima Sugam competition | -4% vs aggregators (theoretical, not yet realised) | December 2025 |
| New insurer entrants (FDI) | Price pressure downward (12–24 months out) | 2026 onward |
The GST benefit is locked in and certain. The competitive pricing benefits from Bima Sugam and new FDI entrants are real but deferred.
For a healthy 30-year-old buying today vs 12 months ago: the effective premium is 15–18% lower due to GST removal alone. For someone who was waiting — reconsidering based on price — the environment has materially improved.
The Section 80C and 80D Angle: Tax on Top of No-GST
Term insurance premiums remain deductible under Section 80C (up to Rs 1.5 lakh annually) under the old tax regime. This is separate from the GST exemption.
For buyers on the old income tax regime:
- A Rs 12,000/year term premium reduces your taxable income by Rs 12,000
- At a 30% tax bracket, the after-tax cost of a Rs 12,000 premium is Rs 8,400 (Rs 12,000 minus Rs 3,600 in tax saved)
- Adding the GST saving (Rs 2,160 vs pre-September 2025): the combined benefit is Rs 5,760 on a Rs 12,000 nominal premium — an effective cost of Rs 6,240
Buyers who have migrated to the new tax regime do not receive the 80C deduction but still benefit from the GST exemption.
For buyers comparing total cost of ownership, the old tax regime with Section 80C is structurally cheaper for term insurance, provided you have not used the Rs 1.5 lakh limit elsewhere. This is a tax planning decision — not an insurance decision — but it is worth factoring into the total cost comparison.
The Riders Question: Do They Also Benefit From GST Removal?
Yes — all riders attached to an individual term insurance policy are covered by the GST exemption. This includes:
Critical Illness Rider: Pays a lump sum on diagnosis of 30–64 listed critical illnesses (cancer, heart attack, stroke, kidney failure, etc.). Previously attracted 18% GST on the rider premium. Now 0%.
Accidental Death Benefit Rider: Pays an additional sum if death occurs due to accident. Now 0% GST.
Waiver of Premium on Disability Rider: Waives all future premiums if the policyholder is permanently disabled. Now 0% GST.
Waiver of Premium on Critical Illness Rider: Waives future premiums on diagnosis of a critical illness. Now 0% GST.
The combined effect: if your base premium is Rs 12,000 and your riders total Rs 3,000/year (a common configuration for a comprehensive term plan), the total GST saving is Rs 2,700/year — not just on the base premium.
Practical Steps: What to Do This Month
If You Do Not Have Term Insurance
- Calculate your cover need using the DIME formula (Debt + Income replacement + Mortgage + Education)
- Get quotes on PolicyBazaar for a broad baseline. Cross-check on Bima Sugam.
- Shortlist two insurers on CSR (above 98.5%) + complaint volume (below 5 per 10,000 claims)
- Go direct to the insurer’s portal — the quote will be the same or marginally lower
- Disclose your full medical history, smoking status, and occupation accurately
- Buy now — premiums increase 4–8% per year of delay; the GST savings you realise by buying today vs next year are only part of the equation
If You Have an Existing Policy Purchased Before September 22, 2025
- Your next renewal invoice should reflect 0% GST — no action required from your end
- If it does not, contact your insurer immediately and reference the September 2025 exemption
- Check whether your existing cover is sufficient — your income, loans, and dependents may have changed since purchase. If you need to increase cover, buying a second policy (rather than surrendering and replacing) preserves your existing 3-year Section 45 protection clock
If You Have Only Employer Group Term Insurance
- Your group cover is not covered by the GST exemption — it remains at 18% GST
- Group cover is also non-portable (it ends when you leave the job)
- Buy an individual term plan independently. The group cover continues as a supplementary layer; the individual policy protects your family regardless of your employment status
Numbers That Justify Acting Now vs Later
For a 30-year-old male buying Rs 1 crore cover till age 65:
Buying today (June 2026):
- Annual premium (Axis Max Life, indicative): Rs 11,500
- GST: Rs 0
- Annual cost: Rs 11,500
- 30-year total premium: Rs 3,45,000
Buying in June 2027 (one year later):
- Annual premium (after 4–8% age-based increase): Rs 12,000–12,500
- GST: still Rs 0
- Annual cost: Rs 12,000–12,500
- 30-year total premium (from 2027 for remaining 29 years): Rs 3,48,000–3,62,500
The combined cost of waiting one year:
- One year without cover: immeasurable (if death occurs in that gap, family gets nothing)
- Higher locked-in premium: Rs 500–1,000/year for the rest of the 29-year term = Rs 14,500–29,000 in additional premiums
The GST exemption is already priced in for anyone buying today. The case for acting now is not about extracting a promotional benefit — it is that every year of delay permanently increases the premium you lock in for the next 30+ years.
Summary
Three things changed between September 2025 and the time you are reading this:
-
GST on your individual term insurance premium is 0% — effective September 22, 2025. If you are paying 18% GST, something is wrong. The saving ranges from Rs 1,440 to Rs 5,400/year depending on your premium, and Rs 43,200 to Rs 1,62,000 over a 30-year policy.
-
Bima Sugam launched in December 2025 as IRDAI’s answer to aggregator commissions. Its 1.4% commission cap vs. PolicyBazaar’s 5.5% represents a structural pricing improvement — not fully realised yet, but directionally certain over 18–36 months.
-
The Insurance Laws Amendment Act 2025 strengthened consumer protections — faster claim timelines, standardised forms, and a principle-based regulatory framework that should improve product transparency over time.
The environment for buying term insurance is better than it has been at any point in Indian insurance history. The remaining variable is not regulation or pricing — it is how long you wait.
Disclaimer: Tax treatment depends on individual circumstances and the income tax regime you have opted for. GST exemption details are based on the GST Council notification effective September 22, 2025. Consult a registered tax advisor for personalised tax planning. Premium rates shown are indicative — actual premiums depend on medical underwriting. HonestMoney does not earn commission from any insurer or aggregator.
