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0% GST makes health insurance a hot pick for bigger, long-term cover: Study

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The government’s move to make retail health insurance GST-free has done more than just cut costs, it has changed the way Indians buy health cover. New data from Policybazaar shows a sharp rise in demand for bigger covers and comprehensive protection.

What’s changed after the 0 per cent GST exemption

  • The average sum insured has jumped 38 per cent, from Rs 13 lakh to Rs 18 lakh.
  • Nearly half of all new buyers (45 per cent) now opt for policies in the Rs 15–25 lakh range.
  • Only 18 per cent are sticking with smaller covers below Rs 10 lakh.
  • Millennials and mid-aged consumers are driving this shift, showing growing awareness of health and financial risks.

Seniors and smaller cities step up

The surge isn’t just among younger policyholders or metro buyers:

  • Older customers (61-75 years and above) have shown an 11.5 per cent rise in buying high-value covers
  • Tier-II cities are catching up, those choosing Rs 15-25 lakh plans rose from 44.1 per cent to 48.6 per cent
  • Meanwhile, small-cover plans dropped from 24.1 per cent to 16.8 per cent, showing people outside metros now want better protection against medical costs

Why people are upgrading

Rising hospital bills and post-pandemic health awareness are key triggers. Buyers are realising that a low-cover plan often falls short when faced with long hospital stays or critical illnesses. Locking in a higher sum insured while young and healthy is also helping them avoid exclusions later in life.

Add-ons and riders are gaining traction

Customers are also customising their policies for wider protection:

Day-1 pre-existing disease (PED) add-on: up from 16 per cent to 20 per cent.

Critical illness add-on: up nearly 20 per cent in just a month.

Riders on renewals: jumped by 50 per cent, as more buyers upgrade their old policies.

Multi-year plans: increasingly popular as consumers prefer long-term financial security.

 

The bigger picture

Siddharth Singhal, business head-health insurance, Policybazaar.com, said the 0 per cent GST “has been a catalyst for shifting from minimal to maximum protection.”

 

-Business Standard 01st November,2025

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