GST Relief Boosts Health Insurance As Coverage Jumps 30%

India’s relationship with health insurance appears to be turning a corner. After years of underinsurance and bare-minimum covers, Indians are finally buying bigger, longer and more comprehensive health policies. A key driver of this shift has been the removal of GST on health insurance premiums.

Data from Policybazaar for end-2025 shows a 31% increase in average health insurance cover, rising from Rs 14.5 lakh before GST removal to nearly Rs 19 lakh after, marking one of the sharpest increases in protection levels seen in recent years.

The most visible change is a decisive move away from sub-Rs 10 lakh covers. Policies with sums insured below Rs 10 lakh fell 24% immediately after GST relief, and are down 29% year-on-year, signalling that buyers now see low covers as inadequate in an environment that is reeling with high medical inflation.

In contrast, mid-to-high value covers have surged. Rs 10-25 lakh policies rose 47% post-GST, while Rs 25 lakh and above covers jumped 85%.

On a year-on-year basis, the trend looks even strong as Rs 10-25 lakh covers rose 55.6%, and Rs 25 lakh+ covers have seen an advancement of 49.3%.

Another notable trend is the rise of multi-year health insurance policies. Buyers are increasingly locking in coverage for longer periods, both to avoid future premium shocks, and to reduce hassles related to renewal.

Four-year policy tenures have grown 56%, while five-year policies are up 62%, according to the data.

Perhaps the clearest sign of changing attitudes is the rapid adoption of unlimited health insurance plans. Once a niche product, unlimited covers now account for 15.7% of total purchases in 2025, up sharply from around 2% in 2024.

These plans, which remove traditional sum-insured caps, are gaining traction among urban buyers who see them as a hedge against catastrophic medical costs. While premiums are higher, GST relief appears to have lowered the psychological barrier to opting for such comprehensive protection.

The data also points to a deeper change beyond pricing incentives. Buying health insurance is increasingly protection-led, not just compliance-driven. Consumers are consciously upgrading covers, adding riders, and choosing policy structures that align with long-term health risks rather than short-term affordability.

Importantly, this shift is not limited to metros. Tier-3 cities now account for 70% of health insurance purchases, up from 63.5% last year, suggesting rising awareness beyond large urban centres.

India’s healthcare costs are rising faster than incomes, and the pandemic has permanently altered how families think about medical risk. GST relief may only have accelerated the shift.

If this trajectory holds, the coming years could see health insurance move from being underbought and undervalued to becoming a core pillar of household financial planning.