When you buy a term insurance plan, you always check things like premium amount, coverage, claim benefits, and policy features. But there is one more thing that affects your premium. This small change can make the price go up. Many people forget about it. This is the GST on life insurance.
Yes, GST plays a role in your term insurance premium. Even if the base premium looks low, GST can increase the final amount you pay each year. So, it is important to understand how GST works and how it affects your policy. The good news is that you can check this very easily with the help of a term insurance calculator.
What Is GST in Simple Words?
GST means Goods and Services Tax. It is a tax added to almost every service you use. You pay GST when you buy things like mobile bills, restaurant food, online subscriptions, and even insurance.
For term insurance, GST is added as a percentage to the premium amount.
So, if your premium is ₹10,000 per year, then GST gets added on top of this amount.
The government has fixed GST rates for different types of insurance. Term insurance comes under a specific category, and the GST rate here is clear and simple.
How much is the GST on life insurance?
Here is the part everyone should know:
- The GST on term insurance premiums is 18%.
Which means that whatever your base premium is, it gets an addition of 18% as tax.
A simple example:
- Base premium: ₹10,000
- GST @ 18%: ₹1,800
- Final premium you pay: ₹11,800
This shows that GST increases your premium. So, you need to check your plan costs only after adding GST. If you forget this, the final amount may surprise you later.
Why is it significant to know about GST?
Many people only look at the base premium shown in advertisements. But the real premium is always higher because of GST. So why should you know this?
Here are some basic reasons:
- Improved budgeting: When you know the GST amount, you know your exact yearly or monthly spending.
- Distinct comparison: Two plans may have close premium amounts, but with GST, one may become more expensive.
- No surprises later: You will not get confused when the bank deducts a higher amount.
- Helps in long-term planning: Since term plans run for several years, even a small amount makes a big difference.
Understanding GST is simple, and it helps you make smart choices.
How Term Insurance Calculator Helps
A term insurance calculator is the easiest way to check your premium. It shows how much you will pay after adding GST. You just enter details like:
- Your age
- Income
- Smoking or non-smoking
- Sum assured
- Policy term
- Payout option
When you click the calculate button, it shows you two things:
- Base premium
- Final premium with GST
This means you do not have to do the maths yourself. The calculator becomes your best helper.
Why You Should Always Use a Calculator Before Buying
Using a term insurance calculator has many benefits. Here are some simple and clear reasons:
- Saves time: You can compare many plans within seconds.
- Displays the impact of GST upfront: You know exactly how much extra you pay due to GST.
- Helps compare affordable plans: Coverage and terms can be tailored to suit your budget.
- Easy to understand: The tool is simple to use, even for a first-time home buyer.
- Helps avoid mistakes: Without a calculator, people often miscalculate GST and premium.
This is why experts always recommend using a calculator before buying a policy.
How GST Changes Your Premium Amount: A Simple Comparison
Let me illustrate an example. This makes everything crystal clear.
A 30-year-old non-smoker seeking a sum assured of ₹1 crore. The insurer shows the base premium at ₹12,000 per year.
Without GST
- ₹12,000 per year
With GST @ 18%
- 18% of ₹12,000 = ₹2,160
- Final premium = ₹14,160 yearly
So, that is the difference: ₹2,160 per year.
Now imagine the policy runs for 30 years:
- Extra money paid as GST = ₹2,160 × 30
- Result = ₹64,800
So, GST makes a big difference over the years. This is why knowing the exact impact is very important.
Another Comparison With Higher Coverage
Now, let’s take a bigger example. A 35-year-old wants cover of ₹2 crore.
Base premium: ₹20,000 per annum.
With GST:
- GST = ₹3,600
- Final premium = ₹23,600 per year
- Difference = ₹3,600
During a 25-year policy,
- Additional amount paid on account of GST = ₹3,600 × 25 = ₹90,000
These examples show that GST is not a small amount. Over the years, it grows into a big number.
Factors That Vary Amount of GST
Even though the GST rate is fixed at 18%, the GST amount keeps changing from person to person. This is because the base premium changes depending on:
- Age
- Lifestyle
- Health history
- Sum Assured
- Policy duration
- Payout options
- Riders added to the plan
A higher base premium automatically means higher GST.
- If your premium is ₹15,000, GST becomes ₹2,700.
- If your premium is ₹30,000, GST becomes ₹5,400.
So GST is always tagged to your premium amount.
How to Reduce the Impact of GST
You cannot reduce the GST rate because it is fixed by the government. But you can reduce your total premium, which will also reduce GST.
Here are simple ways:
- Buy insurance early: The premiums are lower for younger buyers.
- Select only needed riders: Extra riders increase the premium and GST.
- Choose the appropriate sum assured: Choose neither too high nor too low, but what you really require.
- Compare multiple plans: The premiums vary from company to company.
- Keep good health: Nonsmokers and healthy individuals pay significantly less. When your base premium is low, so does your GST amount.
Why GST Shouldn’t Be a Hindrance to Buy Term Insurance
Some people get worried when they see the GST amount. But even with GST, term insurance is still the cheapest and safest way to protect your family.
Think about it this way:
- you pay a small amount more today
- But your family gets financial protection for many years.
A little tax shouldn’t get in the way of giving your family a secure future.
Conclusion
Understanding the GST on life insurance is very important for every buyer. It helps you plan better, compare plans better, and choose wisely. GST increases your premium, but you can easily check the exact impact with a term insurance calculator. The calculator gives a clear picture of both base premium and final premium. It also helps you adjust your plan to fit your budget. So always use it before buying a policy. GST is a part of your premium, but it should not stop you from getting protection. Term insurance is still one of the best and simplest ways to keep your family safe. If you understand GST and use a calculator, you will make a smart and confident choice.
Anantha Nageswaran is the chief editor and writer at TheBusinessBlaze.com. He specialises in business, finance, insurance, loan investment topics. With a strong background in business-finance and a passion for demystifying complex concepts, Anantha brings a unique perspective to his writing.
