Zero GST on Health Insurance Fuels 38% Surge in Demand for Higher Coverage

The removal of Goods and Services Tax (GST) on health insurance plans by the Indian government has led to a substantial increase in demand for higher coverage policies, surging by 38 percent according to a Policybazaar report. This policy change, effective September 22, 2025, aims to make health and life insurance more affordable for consumers by eliminating the GST on premiums. The average health insurance cover has grown from Rs 13 lakh to Rs 18 lakh, reflecting a consumer shift towards more robust financial protection. A significant portion of buyers, around 45 percent, are now choosing policies within the Rs 15-25 lakh range, with another 24 percent opting for Rs 10-15 lakh coverage, while less than 18 percent prefer policies below Rs 10 lakh. This trend is observed across age groups, including millennials and senior citizens, with an 11.54 percent increase in high sum insured plans among those aged 61 to 75 and above 75 years. The awareness for comprehensive protection is also growing in smaller cities, where demand for Rs 15-25 lakh coverage has risen. Add-on covers like Day-1 Pre-Existing Disease (PED) and critical illness coverage are also gaining traction.

Impact This news has a significant impact on the Indian insurance sector, potentially leading to higher sales volumes for insurers and increased financial security for policyholders. It indicates a positive shift in consumer behavior towards proactive health financial planning, which can drive growth in the insurance industry. Rating: 8/10.

Definitions: Goods and Services Tax (GST): A comprehensive indirect tax levied on the supply of goods and services in India, replacing multiple indirect taxes. Health Insurance: A type of insurance that covers the cost of an individual's medical and surgical expenses. Sum Insured (SI): The maximum amount that an insurance company will pay for a claim made under a policy. Day-1 Pre-Existing Disease (PED): Coverage for diseases that an individual had before purchasing the health insurance policy, which becomes effective from the very first day of the policy term.