Term insurance buying in India has risen roughly 1.5 times since the government stopped charging GST on individual life insurance premiums, and a growing share of these buyers are also adding riders such as critical illness and accidental death cover, according to reporting by Business Standard. For earners with dependents or an outstanding loan, this points to a rare window where pure protection cover costs meaningfully less than it did a year ago.
The shift traces back to the GST Council's decision to exempt individual life and health insurance policies from the 18% tax that used to sit on top of every premium, effective September 22, 2025. Term insurance, being pure protection with no investment or savings component, saw one of the sharpest effective price drops of any retail financial product that year, and insurers appear to have passed at least part of that saving through to policyholders. A year on, that saving looks to be translating into more people actually buying cover, and buying more of it.
Key takeaways
- Term insurance purchases have risen about 1.5X since GST was removed from individual life premiums, as reported by Business Standard.
- The exemption took effect on September 22, 2025, cutting the effective cost of a term plan by roughly the 18% that used to be added as tax.
- More buyers are now also opting for riders — add-ons like critical illness, accidental death, and waiver-of-premium cover — alongside the base policy.
- The base sum-assured cost of term insurance has not fallen; only the tax component has been removed, so the underlying mortality-based pricing is unchanged.
- First-time buyers and those with home or personal loans are the most likely to benefit, since a lower premium makes it easier to size cover to match loan liabilities.
- The report reflects a directional trend, not confirmed unit numbers or insurer-wise data — treat the 1.5X figure as an industry-level signal rather than a precise count.
How the GST exemption lowered the real cost of term cover
Until September 2025, every rupee of term insurance premium attracted 18% GST, added on top of the base premium the insurer calculated from your age, sum assured, and health profile. That tax made term cover — already one of the cheapest ways to protect a family's income — even more affordable in relative terms once removed, because none of the savings from the exemption had to be shared with an insurer's investment or distribution costs. Since term plans carry no maturity or investment payout, the entire premium exists to fund the risk cover, so a flat tax removal shows up almost entirely as a lower out-of-pocket premium.
To see the scale of the change, here is an illustrative comparison for a healthy 30-year-old, non-smoking buyer taking a 30-year term plan. These figures are indicative market bands, not quotes from any specific insurer or the report itself:
| Sum assured | Illustrative annual premium (pre-exemption, with 18% GST) | Illustrative annual premium (post-exemption) | Approx. annual saving |
|---|---|---|---|
| ₹50 lakh | ₹9,440 | ₹8,000 | ₹1,440 |
| ₹1 crore | ₹14,160 | ₹12,000 | ₹2,160 |
| ₹1.5 crore | ₹20,060 | ₹17,000 | ₹3,060 |
| ₹2 crore | ₹26,550 | ₹22,500 | ₹4,050 |
Over a 20-30 year policy term, that saving compounds into a meaningful sum — a buyer of ₹1 crore cover could save close to ₹40,000-60,000 in cumulative tax outgo over the life of the policy, money that can instead go toward a larger sum assured or a rider.
Why more buyers are now adding riders
A rider is an optional add-on you attach to a base term policy to widen what it pays out for, usually for a modest extra premium. The report's finding that more buyers are adding riders alongside their base policy suggests many are using the tax saving to upgrade their cover rather than simply pay less overall. Common riders in the Indian market include:
- Critical illness rider — pays a lump sum on diagnosis of specified illnesses like cancer, heart attack, or kidney failure, independent of the death benefit.
- Accidental death benefit rider — adds an extra payout if death occurs due to an accident, on top of the base sum assured.
- Waiver of premium rider — waives future premiums if the policyholder is diagnosed with a critical illness or suffers permanent disability, keeping the base cover active.
- Terminal illness rider — advances part of the death benefit if the insured is diagnosed with a terminal condition, to help fund treatment or last expenses.
Because riders are priced as a percentage add-on to the base premium, the same GST-driven price drop that made base cover cheaper also made riders marginally cheaper in absolute rupee terms — which likely makes it psychologically easier for a buyer comparing quotes to say yes to an extra rider rather than pocket the saving.
Who is benefiting most, and who won't notice much difference
- First-time buyers evaluating quotes now see the full benefit, since the premium they are quoted already excludes GST.
- Buyers with an existing home loan or personal loan benefit indirectly: a lower premium makes it easier to justify buying cover sized to the full outstanding loan amount, rather than settling for a smaller sum assured to keep the premium within budget.
- Existing policyholders renewing an annual or multi-year premium should also see the GST component drop off their renewal premium from the effective date onward, since GST in India is charged at the time of each premium payment rather than fixed when the policy was first issued — though the exact treatment can vary by insurer, so it is worth checking your renewal premium breakup.
- Buyers who already have adequate term cover are unlikely to change behaviour purely because of the tax cut, since the point of term insurance is to match cover to liabilities and income replacement needs, not to opportunistically buy more because it is cheaper.
What to do now if you are shopping for term cover
If you don't currently have term insurance, or your existing cover was bought years ago against a much smaller income and loan liability, this is a reasonable time to review it. A few practical steps:
- Use an EMI calculator to add up your outstanding home and personal loan EMIs, so your term cover can be sized to clear those liabilities in your absence, not just to a round number.
- Get quotes from at least three or four insurers — base premiums (before GST was ever a factor) vary meaningfully by insurer for the same age, sum assured, and health profile.
- Check each insurer's claim settlement ratio, published periodically by the insurance regulator, before choosing on price alone.
- Decide on riders based on genuine gaps in your existing health and disability cover, not because the add-on premium looks small next to the base premium.
- Disclose your full medical and lifestyle history honestly at the proposal stage — this is what protects your family's claim later, not the size of the discount you got today.
Common mistakes to avoid when adding riders
A cheaper base premium can tempt buyers into over-adding riders without checking for overlap with cover they already hold elsewhere — for instance, a critical illness rider bought on top of a term plan when the buyer already has a separate standalone critical illness policy or adequate health insurance. Another common mistake is treating the waiver-of-premium rider as a substitute for actually building an emergency fund, when it only protects future premiums and does nothing for current income loss. Buyers should also avoid choosing the cheapest possible rider bundle without reading what illnesses or events are explicitly excluded, since rider exclusions are often narrower than buyers assume.
Outlook: will term insurance stay this cheap
The GST exemption is a tax policy change, not an insurer discount, so barring a reversal by the GST Council, the lower effective premiums should hold going forward. What can still move is the base premium itself, which insurers periodically revise based on updated mortality data, reinsurance costs, and competition — so a quote that looks attractive this year is not guaranteed to be repriced identically next year. Buyers who lock in a level-premium term plan now secure today's rate for the full policy term regardless of future repricing, which is one reason the current period may be drawing in buyers who were previously undecided. For readers weighing this alongside other financial commitments, it's worth checking the latest interest rate tables too, since loan and deposit rates shift on their own cycle independent of insurance pricing.
Frequently asked questions
Does the GST exemption apply to term insurance policies I already own?
In most cases, yes — GST is charged at the time each premium is paid, not fixed when the policy was originally issued, so renewal premiums on existing policies paid on or after the effective date should also exclude the 18% tax. The exact presentation on your premium receipt can vary by insurer, so it's worth checking your latest renewal notice.
Is term insurance the same as other types of life insurance for tax purposes?
The GST exemption announced in 2025 covers individual life and health insurance policies broadly, including term plans, endowment plans, and individual unit-linked plans, not just term insurance specifically. Term insurance saw a proportionally larger effective saving because, unlike savings-oriented plans, its entire premium goes toward risk cover rather than being split with an investment component.
How much term cover do I actually need?
A commonly used rule of thumb is 10-15 times your annual income, adjusted upward for any outstanding home or personal loan balance and future goals like children's education. Someone earning ₹12 lakh a year with a ₹60 lakh home loan outstanding, for example, might reasonably target cover in the ₹1.5-2 crore range rather than a flat multiple of income alone.
Are riders worth the extra premium?
Riders are worth adding when they close a genuine gap — for example, a critical illness rider if you don't already hold a separate health or critical illness policy. They are less useful when they duplicate cover you already have through an employer group policy or a standalone plan, so it's worth mapping your existing cover before adding new riders purely because they now look cheap.
Where can I check if an insurer is genuine and properly registered?
India's insurance regulator maintains oversight of all registered insurers, and buyers can cross-check an insurer's standing and claim-related disclosures through the regulator's official channels before purchasing a policy, particularly when buying online through an unfamiliar aggregator or agent.
BankCreds analysis
The 1.5X rise sounds dramatic, but it needs a base-rate check: term insurance penetration in India has historically been extremely low, with only a small fraction of income-earning, insurable adults holding a standalone term policy. A 50% jump off a small base is a genuinely encouraging signal for the industry, but it does not mean term insurance has suddenly gone mainstream — it likely still represents a modest absolute number of new policies relative to the working population that needs cover and doesn't have it.
A worked read on what the saving actually means. For a household earning around ₹12 lakh a year and carrying a ₹60 lakh home loan, a reasonable ₹1.5-1.8 crore term cover might have cost roughly ₹20,000-24,000 a year before the exemption; post-exemption, that drops by somewhere in the ₹3,000-4,000 range annually. That's real money, but it's unlikely to be the deciding factor for someone who was never going to buy term cover in the first place — the bigger barriers to India's low insurance penetration have long been awareness, the discomfort of medical underwriting, and the (mistaken) sense that group cover through an employer is sufficient. The tax cut probably tipped over people who were already close to buying, rather than created a new pool of buyers from nothing.
The rider uptick deserves a more skeptical read than the headline gives it. Riders were never separately taxed at a different rate before the exemption — they were bundled into the same premium and got the same GST treatment as the base policy. So the fact that more buyers are adding riders now is less about riders becoming newly affordable and more likely a behavioural effect: buyers who see a lower total premium than expected appear to be redirecting part of that saving into upgrading their cover rather than pocketing it. That's a reasonable use of the saving, but it is a choice, not a requirement — someone who genuinely doesn't need a critical illness rider gains nothing by adding one just because the premium delta looks small.
What this doesn't mean: it isn't evidence that term insurance itself has become cheaper in the sense insurers usually mean it — base mortality-based pricing hasn't changed, only the tax layered on top has been removed. Readers should treat this as a genuine, if modest, tailwind for anyone already planning to buy cover this year, not as a reason to rush a purchase they hadn't otherwise considered.
This section is BankCreds' own assessment of what the development means for Indian borrowers and savers. It is independent commentary, not part of the source reporting above.
Sources & references
- Business Standard — originating report https://www.business-standard.com/finance/personal-finance/term-insurance-purchases-rise-1-5x-post-gst-break-more-buy-riders-report-126091600587_1.html
- IRDAI — regulatory oversight of insurers and claim settlement disclosures referenced for buyer due diligence https://irdai.gov.in/
- Press Information Bureau — official government communication on the GST exemption for individual life and health insurance https://www.pib.gov.in/
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Editorial note & disclaimer
How this was reported. The development above is attributed to the source or sources listed. BankCreds does not independently verify a third party's reporting; where a figure or a regulatory position is stated as fact, it is either attributed or drawn from the regulator's own published material. Everything under "BankCreds analysis" is our own assessment.
Rates and figures. Interest rates, per-gram values and premium bands quoted here are indicative, move daily, and differ by borrower profile, city and lender policy. Confirm the final number with the institution before you act on it — the sanction letter or policy schedule governs, not a news report.
Not financial advice. This article is general information for an Indian audience. It is not investment, tax, credit or insurance advice, takes no account of your circumstances, and BankCreds is not a lender, broker, distributor or advisor. Consider speaking to a SEBI-registered investment adviser or a qualified professional before acting.
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