Buying Home Loan Insurance? Online vs Bank Plans Show Up to 72% Cost Gap

The gap between online home loan insurance and bank-sold bundled cover is no longer minor. Recent comparisons show that for long tenures, the total premium outgo can differ sharply, with online options being pitched as up to 72% cheaper, largely due to pricing structure and GST treatment.

Home loans in India are stretching to 20–30 years, and families increasingly want a back-up plan if the primary earner is not around. This is where loan protection plans, often sold as “home loan insurance”, enter the conversation. The issue is timing and transparency. 

Many borrowers meet the insurance pitch at the bank counter during disbursal, with limited room to compare. Online plans, on the other hand, are being marketed as flexible and lower-cost, backed by fresh data points and the post-September 2025 GST reset.

The Cost Trap At Disbursal Window (What Is The Real Issue?)

A big chunk of offline home loan insurance is sold along with the loan and can feel like a default add-on. The borrower may not always get a clean split of premium, GST, commissions, and whether the cover reduces with the loan. 

Business Standard flagged that offline covers are typically bundled at disbursal, with limited visibility on pricing and product features, and can be rigid if the loan is prepaid or refinanced.

Goodreturns also pointed out that online covers are gaining attention because they can remove “middle layers”, offer clearer pricing, and in some products allow claim money to go to the family instead of the lender.

What Is Driving The 72% Premium Gap? 

The headline saving is built on a widely quoted 20-year illustration. For a 30-year-old borrower with a ₹1 crore home loan at 8% interest, the cited data shows offline cover resulting in a total premium outgo of around ₹5.98 lakh, while the online option is about ₹1.6 lakh for similar cover.

Insurance Asia further adds the monthly angle, stating premiums of ₹2,492 (offline) versus ₹729 (online).

Goodreturns clearly mentions the comparison shows online cover can be up to 72% more cost-efficient in a scenario where no death claim arises, which is how long-term premium outgo comparisons are typically presented.

Before getting into reasons, the cost picture looks like this.
 

This mix of totals and monthly figures has been reported across Goodreturns, Business Standard, and Insurance Asia between January 09, 2026 and January 12, 2026.

The key question is why this gap exists now.

What Happened Earlier?

The strongest tailwind for online pricing is the GST change on individual insurance premiums. The GST Council announced on September 03, 2025 (56th meeting) that GST on individual life and health insurance premiums would move from 18% to 0%, and the implementation date was stated as September 22, 2025.

The Department of Financial Services later clarified that, as per Notification No. 16/2025 Central Tax (Rate) dated 17.09.2025, the exemption applies when the insured is not a group, and group credit life and group term policies continue attracting 18% GST.

This matters because bank-bundled covers are often structured differently than direct individual purchases. Add the distribution model, and the pricing gap becomes visible. Insurance Asia attributed the 72% gap to direct-to-customer pricing and the “zero GST” angle for online plans, while noting offline plans typically attract 18% GST.

Policybazaar’s own launch note gives a second illustration: a 25-year-old borrower with ₹1 crore loan, 8% interest, and 15-year term, with an online premium quoted at ₹622 per month.

Before the reader jumps to buying, the product structure checks matter as much as price.
 

A wider pattern is also visible in retail lending: rules and structures are being tightened across categories. LoansJagat, in its 05 Dec 2025 report on potential stricter gold loan rules in 2026, flagged how policy changes can reshape borrower outcomes even when the loan product looks “standard” on day 1. That same mindset now applies to insurance add-ons too.

What Stakeholders Are Saying?

Policybazaar is positioning its online home loan insurance as a lower-cost and flexible alternative, citing “no GST” and no commission-style layers, and claiming plans can be up to 72% more affordable than traditional covers offered with home loans.

At the same time, The Economic Times carried a caution: if GST is 0% and input tax credit is not available, insurers may pass on part of the lost credit as added cost. The article quoted Ashwin Ghai, ex-director of LIC, on this risk.

Conclusion

Online home loan insurance is being sold as a clean-price alternative, and the data points show savings can reach 72% in some long-tenure illustrations. Borrowers still need to check structure, GST treatment, and payout mechanics before signing at disbursal.