Waiting for GST-free insurance? You could lose big if your renewal is due before Sept 22

If your individual life or health insurance policy is due for renewal before September 22, don’t delay — or you could lose critical benefits like your no-claim bonus, renewal discounts, or even coverage continuity. While premiums will drop after that date due to the GST Council’s move to scrap the 18% tax, experts warn the savings might not be worth the risk of missing a renewal deadline.

From September 22, premiums on individual life and health insurance policies will be exempt from GST, reducing the cost burden on policyholders. For example, a ₹1,000 premium that currently costs ₹1,180 with tax will now return to just ₹1,000.

However, there's a catch. Insurers will no longer be able to claim input tax credit (ITC) on operational expenses like agent commissions, reinsurance, and admin costs. This could prompt some insurers to raise base premiums slightly, muting the full benefit of the tax exemption.

According to experts, the savings for customers could fall short of 18% if insurers adjust for lost ITC. Some may absorb the hit to protect market share, especially in competitive segments like term plans, but others may increase pricing.

Policyholders nearing renewal should act now, particularly if their grace period ends before September 22. Waiting for a marginal price drop may lead to a break in coverage — and that means losing accumulated benefits like no-claim bonuses and loyalty discounts.

New buyers, however, may benefit by waiting until after September 22, or by using the free-look period to switch to newer, cheaper policies without penalties.

The GST cut also improves the appeal of traditional savings products like endowments and ULIPs. With the full premium now invested, returns on long-term plans could improve over time.

While the GST exemption is a step toward broader affordability, experts caution that the real impact depends on how insurers adjust their pricing — and whether those savings are transparently passed on to policyholders.