Editorial staff
Now, with this exemption, individuals and families will pay only the actual premium amount. There will be no extra tax.
This move is expected to bring big relief to millions of Indians, especially middle-income families and senior citizens. It will also help expand health coverage and support the government’s goal of inclusive healthcare access for all. Let’s understand how in detail.
Why was GST removed from health insurance?
The GST Council, in its 56th meeting held on September 3, 2025, chaired by Finance Minister Nirmala Sitharaman, announced this reform. The Council decided that all individual health insurance policies would now be fully exempt from GST. This includes:
- Individual health insurance policy
- Family floater policies
- Senior citizen health insurance policy
- Reinsurance policies related to these products
Until now, all these plans had 18% GST, which increased the cost of premiums. But after the amendment, it has been removed. It means that anyone purchasing or renewing a mediclaim policy will pay less than before. For more clarity, check out the table below:
| Details | Amount |
| A) Yearly Premium | Rs. 10,000 |
| B) GST (18%) before exemption | Rs. 1,800 |
| C) Total Premium earlier (A + B) | Rs. 11,800 |
| D) Total Premium now (A) | Rs. 10,000 |
| Savings due to GST removal (C - D) | Rs. 1,800 |
This simple change can lead to meaningful savings, especially for families that maintain multiple health insurance policies for all members.
Zero GST = Less Premium = More Coverage!
By making health insurance cheaper, the government is not only supporting individual health insurance policyholders but also encouraging more people to come under the insurance umbrella. Currently, India’s health insurance penetration is significantly low! Many people rely on out-of-pocket payments during medical emergencies.
Now, with lower premium costs, more people are likely to buy a mediclaim policy for themselves and their families. This will lead to:
- Broader coverage
- Fewer financial shocks due to hospital bills
- Better access to private healthcare facilities.
How this creates a win-win situation for everyone
According to experts from rating agencies and the insurance industry, the removal of GST on health insurance policies will support the overall healthcare system. When more people have insurance, hospitals get timely payments, and patients don’t delay treatments due to cost concerns.
In the long run, this reform could lead to:
- Better health outcomes: People will seek treatment earlier, avoiding severe illness stages
- Reduced financial stress: Families won’t have to sell assets or borrow money to pay medical bills.
- Boost to the insurance industry: More demand for mediclaim policies means growth in premium income.
- Stronger private healthcare network: Hospitals will be able to expand and improve facilities due to steady inflow of insured patients.
Additionally, citizens will get affordable coverage and financial protection. At the same time, insurance companies will gain new customers and hospitals will see more insured patients.
What does this change mean from a policyholders’ perspective?
For a common person, the most direct benefit is cost reduction. Every rupee saved in tax can be used for medicine, preventive check-ups, or adding more coverage benefits.
For example, earlier if a mediclaim policy of Rs. 10,000 cost Rs. 11,800 after GST, many people avoided buying one, thinking it was expensive. Now, at a flat Rs. 10,000, it becomes a far more practical choice.
This will also help first-time buyers, especially younger individuals and newly married couples, to opt for a health insurance policy early in life. Early coverage ensures:
- Lower premiums
- Fewer waiting periods
- Better long-term protection.
Impact on different types of policyholders
The removal of GST on health insurance premiums will benefit almost every section of society. Whether it’s a young family planning financial security, a retired couple managing medical costs, or self-employed professionals without corporate coverage, everyone stands to gain!
The impact of this reform can be clearly seen across different categories of policyholders. Let’s see how:
| Category | Type of Policy/Benefit | Impact of GST Exemption |
| Families | Family floater mediclaim policy | ●Premiums become more affordable ●This allows parents to include all family members under one comprehensive plan without extra tax burden. |
| Senior Citizens | Senior citizen health insurance policy | ● Since premiums are generally higher for older adults, removing GST provides significant savings ● They can now better manage their healthcare costs |
| Middle-Income Earners | Individual or family mediclaim policies | ● Lower premium costs make insurance more accessible. ● It allows families to protect themselves without straining monthly budgets. |
| Small Business Owners & Self-Employed Individuals | Individual mediclaim policy | ● People without employer-sponsored insurance can now buy affordable protection ● This ensures financial safety during medical emergencies. |
The advantage? Now, healthcare protection is not limited only to the wealthy! By reducing costs for all, the government is making health insurance policies inclusive and accessibly to even marginal citizens.
Conclusion
The GST exemption on health insurance policies marks a historic moment for the insurance sector in India as it directly:
- Benefits individuals and families
- Increases insurance penetration
- Promotes financial stability during medical emergencies.
With the government’s decision, a mediclaim policy is now more affordable than ever before. People can get protection without worrying about added tax costs, while insurers can reach new segments of the population.
Editorial staff
