When you buy term insurance, you want to protect your family’s future. You want to make sure they stay safe even if life takes an unexpected turn. But when you look at your premium amount, you may notice something extra added to it. This extra amount is GST on term insurance.
Many people feel confused when they see GST on their premium. Some even wonder why they need to pay it, how much it is, or how it affects the total cost of their policy. If you also feel the same, do not worry. This guide will explain everything in the simplest possible English, so people of all age groups can understand it without any stress.
Let’s begin with the very basics.
What is GST?
GST means Goods and Services Tax. It is a tax added to many products and services in India. Instead of many small taxes, the government created one simple tax.
Whenever you buy something or use a service, GST may be applied. Insurance services also come under GST. So, when you pay for term insurance, GST is added to your premium amount.
Why is GST levied on term insurance?
Insurance companies provide a service. That service is the promise to pay a lump sum amount to your family if something bad happens to you.
Since it is a service, the government applies GST to it, just like it does for other services in the country. This helps the government collect money for running the country, building roads, creating hospitals, and providing public services.
How much GST is charged on Term Insurance?
GST on term insurance is straightforward. According to the prevailing regulations:
- GST rate is 18%
- This 18% is applied only on the base premium, not on the full policy amount.
So if your base premium is ₹10,000 per year, GST will be 18% of ₹10,000, i.e., ₹1,800.
Your total payable premium becomes:
₹ 10,000 + ₹ 1,800 = ₹ 11,800
This is why your premium may feel higher at times than you anticipated.
Does GST Make Term Insurance Expensive?
Yes, GST increases the premium a little. But even with GST, term insurance is still the cheapest and most potent life cover available in India. You can get very high coverage at a very low cost.
As an example, a 30-year-old would pay only ₹ 8-10 per day for a ₹ 1 crore cover-even after adding GST.
So yes, GST adds a bit more money, but it does not change the value of the plan. Term insurance still gives amazing protection at a very affordable price.
Why You Should Still Buy Term Insurance, Despite GST
Many think that GST makes term insurance less attractive. That is not true. Following are strong reasons why you should not skip term insurance:
Your family remains financially secure: In case something happens with you, your family receives a large amount of money, so they can continue their life with dignity.
- Premiums are still too low: Term insurance carries the lowest premium amongst all insurance plans. Even after the addition of GST, it is highly reasonably priced.
- Tax benefits: You get tax deductions under Section 80C. Hence, you save indirectly, even after paying GST on the term insurance.
- Peace of mind: No amount of GST replaces one’s peace of mind. Safety of the family is simply priceless.
How GST Affects Various Types of Premiums
GST on term insurance depends on the case of how you pay your premium. Here are some of the most usual cases:
- Annual premium: This is the most subscribed plan. 18% GST of the amount will be levied once every year.
- Half-yearly premium: If you pay twice a year, GST is added to each payment.
- Quarterly premium: If you pay three months, it includes GST each and every time.
- Monthly premium: Plus GST every month. It feels like a pretty less amount, but the rule remains the same-18% on the base premium.
How to Calculate GST on Term Insurance Premium
Calculating GST is extremely simple. Just follow these steps:
- Check your base premium amount
For example: ₹12,000 annually
- Times 18%
12,000 × 0.18 = 2,160
- Add GST to your base premium
12,000 + 2,160 = 14,160
This total figure would then be your annual premium inclusive of GST.
Does GST change when insurance rules change?
The GST rules might get amended if the government changes the provisions in the law of taxation. Updates usually happen during the Union Budget or during the meeting of the GST Council.
As it stands today, no change has been made; term insurance GST remains at an even 18%. Any future revisions will be reflected in your premium by your insurer.
Can You Save GST on Term Insurance?
No, GST itself cannot be saved because it is a government tax. However, you reduce your total premium with it to reduce it indirectly.
Here are simple ways to reduce the overall cost:
- Purchase term insurance early: When you are young, your premium is much lower. Lower premium = lower GST.
- Choose a simple scheme: Avoid extra riders that you do not need. The more features you add, the more the base premium increases.
- Compare plans online: Online policies are cheaper than offline plans. So, your GST is also lower.
- Have Good health: People with lifestyle diseases may have to pay higher premiums. A healthy body means a reduced premium and GST amount.
Why Understanding GST Will Help You Make Better Decisions
Many overlook GST, but once you understand it, you have clarity. You know precisely:
- How your premium is calculated
- Why your final payment is higher
- Additional amount paid by you due to GST
- How to keep your premium affordable
- What can be expected at future renewals
This knowledge helps you choose a plan wisely and avoid surprises later.
What happens to GST if you cancel your policy?
If you cancel your term insurance policy, GST is not refunded. This is because GST is a tax paid to the government, and insurers cannot reverse it. This is another reason why you should choose your policy carefully and avoid cancelling it later.
Should GST stop you from buying term insurance?
Emphatically not. GST is just a small extra charge. But term insurance gives your family huge financial safety, long-term peace, and the confidence that they will be taken care of. If you stop buying term insurance just because of GST, you may put your family at financial risk. The purpose of term insurance is much bigger than the tax you pay.
Simple Example to Understand It All
Let’s say:
- Base premium: ₹9,000 per year
- GST: 18% of ₹9,000 = ₹1,620
- Total amount payable: ₹10,620
Even after paying the GST, your premium per day is:
- ₹10,620 ÷ 365 = ₹29 per day
For ₹29 a day, your family gets financial security worth several lakhs or even crores. That is why term insurance is one of the most valuable financial products today.
Conclusion
GST may look confusing, but once you understand it, everything becomes simple. Yes, GST on term insurance increases your premium, but it does not change the main purpose of term insurance, to protect your loved ones in a time of crisis. Term insurance remains the most affordable and powerful financial shield for every family. Paying GST is a small part of buying this protection. If you want safety, peace, and long-term security for your family, term insurance is worth every rupee including the GST.
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