You should not delay or be deprived of the benefits of a bonus, renewal discounts, or even coverage continuity if your individual life or health insurance policy is due for renewal before September 22.
Premiums will be reduced after that specific data because of the proceeds of the GST council to scrap the 18% tax, as per the experts, who cautioned that the savings might not be worth the risk of missing a renewal deadline.
No GST will be there on the premiums on individual life and health insurance policies from September 22, which will lessen the cost burden on policyholders. For instance, a Rs 1000 premium that has the price of Rs 1180 with tax will now return to only Rs 1000.
The insurers will no longer be allowed to claim the input tax credit towards the operational costs, like agent commissions, reinsurance, and admin costs. From this, certain insurers can increase their base premiums, which deprives people of having benefit of tax exemption.
If insurers adjust for lost input tax credit (ITC), then the savings for the customers can fall short of 18%. Some of the people can take a load of the hit to secure market share significantly in competitive segments, such as term plans, but others may raise pricing.
The people whose policy will expire before September 22 must now act. Coverage could get a break if people wait for a marginal cost reduction, which results in losing the accumulated benefits, like no-claim bonuses and loyalty discounts.
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By waiting until after September 22, or by using the free-look period to switch to newer, cheaper policies without penalties, the new buyers might benefit.
The appeal of traditional savings products, such as endowments and ULIPs, will also be rectified from the rate reduction of GST. In the long-term plans, the returns shall improve over time with the investment of the full premium.
The GST exemption move is towards affordability; the main impact is navigated via insurers’ adjustment of cost, and whether those savings are transparently passed on to policyholders.
