For years, term insurance premiums were taxed at 18% GST. Due to this, the premiums were costly, and a lot of people in India avoided term insurance plans due to the tax. However, after the GST 2.0 (w.e.f 22 September 2025, there will be 0% GST charged on term insurance. This makes term insurance premiums much more affordable than ever. However, how does this benefit you, and what should you do? In this post, we'll discuss everything you need to know about this change, why it matters, and how it will affect you. What is Term Insurance? Term insurance is one of the most basic forms of life insurance. You pay a fixed premium for a specific number of years, which is called the policy term. If something unfortunate happens to you within that period, your family receives a lump-sum payment in the form of the sum assured. If nothing happens to you, the policy just ends without any reimbursements. It is called "pure protection" since its only function is to provide your family with financial protection when you are not around. The premiums are much lower compared to other types of insurance, and it is easy for people to afford. What Changed with GST 2.0 Previously, when you bought a term insurance policy, you had to pay 18% GST on the premium, making it costlier to purchase the policy. Let's assume your annual premium was ₹10,000. You used to pay an extra ₹1,800 as tax. Under GST 2.0, this 18% GST has been removed by the government. Now, you only have to pay the premium amount mentioned by the insurer. No extra GST. So a plan that previously cost you ₹11,800 now costs you only ₹10,000. Why is This Important? For Indian families, even minor costs can mean a lot. The GST previously had rendered term insurance plans much less attractive than other financial instruments. However, the GST 2.0 has lowered the price of term insurance, and now it is more attractive and cheaper. Here's why it counts: • Lower premium cost: With no GST, premiums are cheaper and more affordable. • Much more accessible for people: More individuals can purchase term insurance as there is less entry cost. • Promotes financial protection: More and more families will be insured as the demand for term insurance plans rises. How Much Can You Save? Let us consider some examples. If your annual premium on a term plan is ₹15,000, previously you used to pay ₹2,700 extra as GST. Now you save the entire amount. For 20 years, it totals to saving ₹54,000. For an increased cover with a premium of ₹30,000 annually, you save ₹5,400 every year. That is ₹1,08,000 over 20 years. How Will This Reform Benefit You? The reform will benefit policyholders directly and indirectly. 1. Direct benefit: Saves money You only pay the cost of the premium. Hence, buying a term insurance plan will become much more affordable now. 2. Indirect benefit: Simpler long-term planning Now that your policy is less expensive, you can use the amount saved to invest in other objectives such as retirement, education, or medical expenses. 3. More coverage for the same budget Now you have the option to choose a greater sum assured at the same price. Rather than paying tax, you can invest the money in increasing your cover. What Should You Do Now? If you have not purchased a term insurance plan till now, now is the best time to do so. The policies are more affordable, and the sooner you get them, the lower your premium will be. However, if you already have a term plan, you will automatically get lower premiums when the time comes for your next premium. Individuals can also opt to boost their cover now as their pocket permits. How This Reform Affects Financial Planning Term insurance is not only protection. It is also a crucial component of long-term financial planning. With GST at 0%, now you have greater freedom while planning. • You save more money each year. • You can invest the saved money. • You can have a balanced plan that is both for risk protection and for creating wealth. You can also use an income tax calculator to plan your finances and your term insurance. Final Thoughts GST 2.0 has provided a tremendous boost to term insurance by exempting it from tax. This small step eliminates a huge obstacle and makes buying a term insurance plan more easily accessible. To you, it translates into lower costs upfront, increased affordability, and improved planning possibilities. If you haven't thought about term insurance so far, now is the time. It's cheaper, wiser, and made to secure your family's future. The reform has shed the unnecessary baggage, giving you an additional reason not to wait. (Disclaimer: The above press release comes to you under an arrangement with NRDPL and PTI takes no editorial responsibility for the same.). PTI

Term insurance now carries 0% GST, lowering premiums and increasing affordability for policyholders. The reform places 0% GST on term insurance, removing the prior 18% tax on premiums so policyholders pay only the insurer's stated premium; this lowers annual outlays, yields calculable multi year savings, and permits reallocating saved funds toward higher coverage or other financial objectives while increasing affordability and likely boosting demand.