GST Waiver Boosts Health & Term Insurance Demand, Higher Coverage Preferred

The elimination of Goods and Services Tax (GST) on term life and health insurance policies has led to a notable increase in demand for more robust coverage, according to data from Policybazaar. The insurance aggregator recorded a 38% jump in health policies with high sum insured post-GST waiver. Consumers are also showing greater interest in add-on covers such as Day-1 pre-existing disease protection and critical illness benefits.

Policybazaar's report indicates a shift in consumer preference towards higher coverage sums. Currently, 45% of health insurance buyers are choosing plans ranging from ₹15 lakh to ₹25 lakh, a substantial increase from previous trends. The average health cover size has grown from ₹13 lakh to ₹18 lakh.

This trend is prevalent not only in major metros but also in tier-II cities, where the proportion of customers opting for coverage between ₹15-25 lakh has risen. Older policyholders (61 and above) have also shown an 11.5% increase in purchasing high-sum insured policies, alongside millennials and middle-aged individuals who are actively upgrading their coverage.

Furthermore, add-on covers like Day-1 pre-existing disease benefits saw a 25% rise, and critical illness riders increased by about 20% month-on-month. Rider attachments on policy renewals also surged by 50%, suggesting that customers now view health insurance as a vital long-term financial safety net rather than a mere compliance purchase.

For Non-Resident Indians (NRIs), the GST removal on term life insurance has simplified the purchasing process. Previously, NRIs faced complex procedures involving NRE accounts and annual international address proof submission for GST waiver claims. Now, they can use any bank account for premium payments and automatically receive the tax benefit without additional documentation.

Impact: This news is highly positive for the Indian insurance sector. The GST exemption has made insurance more accessible and affordable, encouraging consumers to opt for higher coverage and valuable add-ons. This is expected to drive significant growth in premium collections and overall business for insurance companies. The simplified process for NRIs also opens up a larger market segment. The overall impact on the Indian insurance sector is estimated to be 8 out of 10.

Difficult Terms: Goods and Services Tax (GST): A consumption tax levied on the supply of goods and services, except for those exempt from tax. Term Life Insurance: A type of life insurance policy that provides coverage for a specific period (term). Sum Insured: The maximum amount an insurance company will pay for a covered loss. Pre-existing Disease (PED): A medical condition that a person has before purchasing health insurance. Riders: Optional benefits that can be added to a basic insurance policy to provide additional coverage. Non-Resident Indian (NRI): An Indian citizen who resides outside India for employment, business, or any other purpose.