Group Term Life Insurance

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  • February 11, 2026
  • securenow_insuropedia

As per government and regulatory norms, insurers are required to pay stamp duty for GTL policy. The calculation of the stamp duty amount is as defined under –
1. Stamp duty of INR 0.20 per INR 1000 of the sum insured.
2. Stamp duty is to be paid for every new GTL policy.
3. On renewal of the GTL policy, stamp duty is to be paid for an increase in the sum insured over and above the previous policy sum insured.

Key Takeaways

  • The Loyalty Discount: Since stamp duty is only paid on the “new” portion of the sum insured during renewal, your long-term insurer has lower overheads in year 5 than in year 1. This often translates into lower premiums the longer you stay with them.

  • The “Switching Barrier”: If you move your GTL policy to a new insurer, they must pay stamp duty on the entire ₹1,000s of sum insured all over again. This tax burden makes it very difficult for a new entrant to offer a cheaper quote than your current provider.

  • Calculation Logic: For every ₹1 Crore of Sum Insured, the stamp duty is ₹2,000 ($1,00,00,000 \times 0.20 / 1000$). For a company with a ₹500 Crore total sum insured, the upfront tax is a significant ₹10 Lakhs.

  • Incremental Payments: At renewal, if your team grows or salaries increase—leading to a higher total Sum Insured—you only pay stamp duty on the extra amount (the “Top-Up”).

  • Strategic Selection: Because the stamp duty structure favors long-term retention, the initial choice of an insurer is critical. You are effectively “locking in” a cost structure that gets more efficient over a 4-year cycle.

Additional Read: How Does Group Term Life Insurance Work?

For example, the current policy total sum insured is INR 250 Cr. The insurer would have paid INR 5,00,000 as stamp duty for the sum insured of INR 250 Cr. At renewal, the sum insured increased from INR 250 Cr. To INR 275 Cr. The insurer would have to pay stamp duty of INR 50,000 for the additional sum insured, i.e., INR 25 Cr.

How does stamp duty affect first-time purchase and renewal pricing for GTL?

Insurers generally amortize stamp duty over 3-4 years when they quote for GTL insurance policies so that they are competitive in the market. If an insurer continues to renew the policy over a planned amortization period, i.e. > 4 years, it becomes willing to pass on the benefit of reduced cost to the client. In this manner, your overall cost of the GTL policy will reduce with the maturity of the policy with the same insurer.

So, the stamp duty also makes it difficult for a new insurer to match the prices of the incumbent on renewal. This means that the initial selection of a life insurer is even more important because you are likely to stay with that insurer for a long time.

Summary: GTL Stamp Duty & Pricing Impact

Feature Rule / Rate Impact on Corporate Client
Standard Rate ₹0.20 per ₹1,000 of Sum Insured. Higher the total employee coverage, higher the upfront tax.
New Policies Paid on the Full Sum Insured. Makes switching insurers expensive due to “New Policy” taxes.
Renewals Paid only on the Incremental increase. If sum insured remains same, no additional stamp duty is paid.
Insurer Strategy Amortization over 3–4 years. Prices drop after year 4 as the insurer recovers their tax cost.
Market Competition Incumbent advantage. New insurers find it hard to beat renewal rates of the old insurer.

Frequently Asked Questions (FAQs)

Q1: Is the stamp duty paid by the employer or the insurance company?

A) While the insurer is legally responsible for paying the stamp duty to the government, they recover this cost from the employer by including it in the premium quote. Most insurers will “amortize” or spread this cost over 3–4 years to keep the first-year premium competitive.

Q2: What happens if I decrease my Sum Insured at renewal?

A) If the total Sum Insured decreases, no fresh stamp duty is payable. However, you do not get a refund for the stamp duty already paid in previous years, as that was a one-time tax paid to the government at the policy’s inception.

Q3: Does the stamp duty rate vary by state in India?

A) Generally, for Life Insurance (GTL), stamp duty is governed by the Indian Stamp Act and is uniform. However, it is always wise to check with your broker if there are any specific state-level surcharges applicable to your registered office location.

Q4: If I add 50 new employees mid-year, do I have to pay stamp duty immediately?

A) Yes. When you add new members that increase the total Sum Insured of the group, the insurer will issue an endorsement and charge a pro-rata premium, along with the applicable pro-rata stamp duty for that additional coverage.

Q5: Why do new insurers give “aggressive” quotes if they have to pay full stamp duty?

A) Sometimes a new insurer is willing to take a loss in the first year to “win” a prestigious client. They may absorb the stamp duty cost themselves, hoping to make a profit over the next 5 years once the initial tax expense is recovered.

About The Author

Varun

MBA Finance

Varun has established itself as a knowledgeable and reliable expert in the field with 8 years of experience. Specializing in group-term life insurance, they have dedicated their career to helping businesses and individuals navigate the complexities of insurance products and services. Currently writing for SecureNow, he produces insightful blogs and articles that demystify group-term life insurance, offering practical advice, industry updates, and strategic insights. Their deep understanding of the insurance landscape and talent for clear and engaging communication make their content invaluable for both seasoned professionals and newcomers alike.

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