Indian Life Insurance — Recent Legal Changes, Government Schemes & Embedded Cover

The 2025 amendment of the insurance laws

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 amended the Insurance Act, 1938 and related laws. Its provisions took effect on 5 February 2026, except the one on common officers.

The change most often asked about is foreign investment. The limit for Indian insurance companies was raised from 74% to 100%; before 74% it was 49%, and older material still quotes both figures. A separate limit of 20% applies to LIC. Reported summaries of the Act also note a higher ceiling on penalties, raised from ₹1 crore to ₹10 crore, and a Policyholders' Education and Protection Fund.

Tax changes on premiums

Since 22 September 2025, premiums on individual life insurance policies, whether term, unit-linked or endowment, are exempt from GST. The exemption is for individual policies. Group policies are not covered by it and continue at 18%.

Income tax has also been renumbered. The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026: the deduction for life premiums is now in section 123 (old section 80C) and the exemption for policy proceeds in section 11 read with Schedule II (old section 10(10D)).

Government schemes

The Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) gives life cover of ₹2 lakh for death from any cause, at a premium of ₹436 a year, to people aged 18 to 50. The premium is auto-debited from the member's bank account. It is set by the government and can be revised.

Its companion, the Pradhan Mantri Suraksha Bima Yojana (PMSBY), is accident cover and not life cover: ₹2 lakh for accidental death or total disability and ₹1 lakh for partial disability, at ₹20 a year, for ages 18 to 70.

Embedded insurance and reading the numbers

Embedded insurance means cover offered at the point of sale of another product or service. Life cover offered to a borrower along with a home loan is an example. The customer may accept or decline it, and the policy documents set out the free-look and cancellation terms that apply. Adding cover without the customer's consent would be mis-selling.

Market statistics such as penetration and market share change every year. IRDAI publishes them in its annual reports, and a figure means little without its year. This lesson quotes none, for that reason.

Rules at a glance

Key points

• The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 took effect on 5 February 2026, except its provision on common officers.
• Foreign investment in Indian insurers may now go up to 100%; it was 74% and, earlier, 49%. LIC stays at 20%.
• GST is nil on individual life insurance premiums since 22 September 2025; group policies remain at 18%.
• PMJJBY gives ₹2 lakh of life cover for ₹436 a year to people aged 18 to 50.
• Embedded insurance is cover offered with another product, which the customer may accept or decline.
• A market statistic means little without its year; IRDAI's annual reports are the source.

Common misunderstandings

• The foreign investment limit is not 74% or 49% any more: it is 100% from 5 February 2026, with LIC at 20%.
• The GST exemption does not cover every life policy: it is for individual policies, and group policies remain at 18%.
• PMJJBY is not accident-only cover: it pays ₹2 lakh on death from any cause, while PMSBY is the accident scheme.
• Cover offered with a loan is not compulsory merely because it appears on the application: the customer may accept or decline it.
• A penetration or market-share figure is not a fixed fact: it changes every year and needs its year and source.

Questions people ask