When you buy a term insurance plan, you expect one simple thing: you want your family to stay safe even if you are not around. But when you look at the premium, you may notice something extra added to the amount. This extra charge is GST. Many people get confused about why they pay it, how much they pay, and how it changes the final premium.
This is where understanding GST becomes important. And this is also where a term insurance premium calculator helps you. It shows you the real cost you will pay, including taxes. In this blog, we will explain everything in the simplest way so that people of all age groups can understand it easily.
Let’s begin step by step.
What is GST?
GST means Goods and Services Tax. It is a tax that the government charges when you buy goods or services. Insurance is considered a service, so GST is added to insurance premiums too.
The GST rate on life insurance plans, including term insurance, is 18%. Many people do not notice it, but it increases the total premium you pay every year.
Why is GST levied on Term Insurance?
A term insurance plan is a service that protects your family. Since it is a service, GST applies to it just like it applies to many other services in India.
It is not an extra fee from the insurance company. It is a tax the company collects on behalf of the government.
Now, you pay a portion of the premium amount as part of the GST whenever you pay your premium.
What is the GST on life insurance?
The GST rate on life insurance is 18%, and it applies to most term insurance plans.
To cut a long story short:
- If your base premium is ₹10,000
- GST (18%) = ₹1,800
- Total premium you pay = ₹ 11,800
This shows how GST can increase the cost of your policy. When you look at your premium slip or online payment page, you will notice this extra amount clearly. This is why knowing the GST on life insurance beforehand matters before buying.
How GST Changes Your Term Insurance Premium
Many people think GST is a very small change. But when you add it to a long-term policy, the amount grows. Most people buy term insurance for 30 to 40 years. So, paying GST every year becomes a big part of the total cost.
In this example,
- Base premium: ₹15,000
- GST: 18%: ₹2,700
- Total annual premium: ₹17,700
If you pay this for 30 years:
- Base premium for 30 Years: ₹4,50,000
- 30 Years of GST – ₹81,000
- Total paid: ₹5,31,000
So you pay ₹81,000 extra only as GST over the full term. This is why it is important to understand GST before buying a policy.
Why You Should Always Use a Term Insurance Premium Calculator
A term insurance premium calculator helps you see the full premium you will pay, including GST. It shows you the real cost so you do not get any surprises later.
Here is what the calculator does:
1. It does indicate base premium
This is the premium without the GST.
2. It automatically adds GST
You do not have to calculate it by hand.
3. It provides the final premium
This is what you finally pay.
4. It allows you to try out different options.
You can compare premiums for:
- Different ages
- Various policy terms
- Different sum assured amounts
- Smokers versus non-smokers
5. It allows you to select a plan that suits your budget.
When you see the full premium, including GST, you can choose an amount that you can afford for many years.
How GST Affects People of Different Age Groups
GST affects everyone, but the impact is different for each age group. Let us understand this with easy examples.
1. Young adults: between 20 and 30 years
Premiums are very low for this group. Because the base premium is small, GST also stays small.
Example:
- Base Premium: ₹7,000
- GST (18%): ₹1,260
- Total: ₹8,260
Thus, a young person pays much less GST compared with older purchasers.
2. Middle-aged buyers, between 31 and 45 years
Premiums rise because health risks increase with age. This means GST also becomes higher.
Example:
- Base premium: ₹12,000
- GST (18%): ₹2,160
- Total: ₹14,160
3. Older purchasers: between 46 and 60 years
This group pays the highest GST, as their premium amount is already high.
Example:
- Base premium: ₹25,000
- GST (18%): ₹4,500
- Total: ₹29,500
Therefore, GST hits older purchasers harder than younger ones.
Does GST make term insurance more expensive?
Yes, GST increases the total premium. But even with GST, term insurance is still the most affordable life cover you can buy. You get a big sum assured for a small yearly cost.
Think in such a way that: If you pay ₹12,000 as a base premium and get GST of ₹2,160 added, you still get coverage worth ₹1 crore. In that sense, the value you get is still very high.
Are there savings on GST available?
You cannot reduce GST itself because it is fixed at 18%. But you can reduce the impact of GST by lowering your base premium. And you can do that in a few simple ways:
- Buy Early: The more youthful you are, the lower your premium. This reduces GST automatically.
- Choosing an adequate sum assured: Do not purchase a very high sum assured except if needed.
- Compare plans: Some plans have lower base premiums; thus, the GST is lower.
- The term to be used is insurance premium calculator: It helps you identify the plans with affordable premiums.
How a Term Insurance Premium Calculator Helps You Understand GST:
The calculator does more than just display the numbers. It serves to:
- Clearly observe the total amount payable: You don’t have to add GST manually.
- Take better decisions: You can see below how the policy term, age, and coverage amount change the final cost.
- Plan your yearly budget: You know exactly how much you will pay each year, including GST.
- Avoid hidden surprises: Many people feel shocked when they see the final bill only at the payment page. Using a calculator removes that surprise.
Example: How GST Changes Your Premium, in a nutshell
Let us take an example of a 30-year-old non-smoker buying a ₹1 crore term plan.
Case 1: Policy A
- Base premium: ₹10,000
- GST 18%: ₹1,800
- Total premium: ₹11,800
Case 2: Policy B
- Base premium: ₹12,000
- GST (18%): ₹2,160
- Total premium: ₹14,160
Case 3: policy C
- Base premium: ₹15,000
- GST 18%: ₹2,700
- Total premium: ₹17,700
This shows that the final price can vary a lot. So using the calculator helps you pick the most affordable option.
Why Understanding GST Is Important Before Buying a Policy
GST may seem like a small thing at first. But when you look at the total policy duration, it becomes an important cost factor. Many people think they can afford a plan, but when GST gets added, the premium may feel heavy. This is why you must always check the final amount using a calculator.
Conclusion
GST affects every term insurance plan. It increases the premium by 18%, and this amount grows over the years because you pay the premium again and again. But do not let GST scare you. Term insurance is still one of the most affordable ways to protect your family. The best way to understand the real cost of a policy is to use a term insurance premium calculator. It gives you a clear picture of your premium with GST included. And when you understand the full amount, you can choose a plan that fits your needs and your budget. So, before you buy your next policy, take a few minutes to check the premium, including GST, and make a smart and stress-free decision.
Also Read: HDFC Life Declares Rs. 4102 Cr. Bonus for Policyholders
