The recent cut in GST on term insurance has made premiums about 18% cheaper. That’s a useful saving — but the bigger risk for families is not buying enough cover or waiting too long. A lower price shouldn’t be an excuse to underinsure.
Why the GST cut matters
Lower taxes reduce the cost barrier for many buyers. More affordable premiums can help people buy adequate cover earlier and for longer tenures. But price alone doesn’t solve the primary problem: determining the right amount of protection.
The real risk: too little, too late
Buying a small policy or postponing purchase leaves dependents exposed to mortgage payments, daily expenses, education costs and future goals. The longer you wait, the higher the premium will be if you develop health issues. The objective should be to lock in sufficient cover while you are healthy.
How to know if your life cover is truly adequate
- Calculate income replacement: A common rule is 10–15 times your current annual income. For example, someone earning ₹8 lakh per year might need ₹80–120 lakh in cover, depending on liabilities and goals.
- Cover outstanding liabilities: Include home loans, personal loans, credit card debt and any co-signed obligations. Life cover should clear these to prevent financial stress for survivors.
- Factor in future expenses: Add costs for children’s education, marriage, and any planned family goals. Use realistic timelines and inflation estimates.
- Consider the tenure: Match the policy term to the period your dependents need income — typically until retirement or when liabilities and major goals are met.
- Account for spouse’s earnings: If your spouse works, include their expected contribution. If they don’t, include the cost to replace household services.
- Maintain an emergency fund: Life cover shouldn’t be the only buffer. Keep 6–12 months of living expenses in liquid savings to handle short-term shocks.
- Know what the policy excludes: Read fine print on waiting periods, exclusions and claim conditions. Riders (critical illness, accidental death) add protection but aren’t substitutes for adequate sum assured.
- Affordability vs adequacy: Lower premiums from the GST cut can be used to buy higher sum assured rather than just reducing cost. Prioritize cover amount first, then choose a premium you can maintain.
- Insurer credibility: Check claim settlement trends and customer service reputation. A payout matters more than a cheap premium if claims are disputed.
Simple calculation example
If your annual income is ₹10 lakh, you have a ₹40 lakh home loan and expect ₹30 lakh for children’s education, a basic cover estimate could be:
- Income replacement (12×): ₹120 lakh
- Liabilities and goals: ₹40 lakh + ₹30 lakh = ₹70 lakh
- Suggested sum assured: ₹120 lakh + ₹70 lakh = ₹190 lakh
A quick checklist before you buy
- Do you have at least 10× your income in cover?
- Will the policy term cover your financial dependents until they become self-sufficient?
- Are outstanding debts fully accounted for?
- Can you afford the premium long-term, even if it rises?
- Have you read exclusions and considered necessary riders?
When to review your cover
- After major life events: marriage, childbirth, home purchase, job change.
- When your income or liabilities change significantly.
- Every 2–3 years, or after inflationary shifts and changing goals.
Lower GST makes term insurance more accessible. Use that saving wisely: buy sooner rather than later, and choose a sum assured that truly protects your family’s future rather than one that just fits a cheaper monthly premium.