Tax Benefits Bring Down Effective Cost of Health Insurance

​A health insurance policy is a must in these times of high costs of medical treatment. The twin advantages of insurance and tax benefits make this cover more cost-effective.

Health insurance is a must for all today. There are two very good reasons why you need to ensure you have a health insurance cover for your entire family.

The first and main reason is the rising cost of medical treatment alongside the state-of-the-art technology that is fast-changing its application. While you have the latest in both technology and medicines right here, they cost a lot of money. Any illness that requires hospitalisation will set you back financially if you don’t have insurance to pick up the tab.

The second reason is the tax benefit that insurance gets you. Along with the insurance cover, a health policy is eligible for tax deduction. It is therefore prudent to use the policy as a part of your tax planning exercise and also bring down its effective cost.

Sops on health insurance

You can get tax benefits on a health insurance policy both for yourself and other family members – parents, spouse and dependent children. This gives you the option of security for the entire family along with a tax deduction that reduces your taxable income. In a way, the insurance comes with benefits given the tax advantage. This makes a health insurance cover a tax planning tool too.

Here’s a glance at the tax benefits under Section 80D of the Income Tax Act 1961:

• Deduction allowed against premium paid for self, spouse, and dependent children – Rs Rs 25,000. *

• If parents are aged over 60 years an additional deduction of Rs 25,000 is available on premium paid towards their insurance. *

• In case you or your spouse, and parents, are aged over 60 years, the maximum deduction available under Section 80D is Rs 1 lakh. *

• Members of a Hindu Undivided Family (HUF) can claim deduction under Section 80D against the insurance premium paid for a policy covering them. The deduction available is Rs 25,000 if the insurance is for members below 60 years of age and Rs 50,000 if it is for senior citizens. *

Documents to claim tax benefits

In order to claim the deductions available, you need to furnish a copy of the insurance policy and receipt for the premium paid. The policy should bear the names of all the family members covered in the policy along with age (more so in case you are claiming the higher benefit available to senior citizens). Apart from the names and age, your relationship with the insured persons should be mentioned too to ensure they qualify for the deduction available to a family.

In addition, you will need a Section 80D certificate if you have paid the premium on a policy for your parents.

Some norms that need to be followed

It is crucial to bear in mind that the deduction is available only if the premium is paid in any form other than in cash. So, you need to ensure you pay through a cheque, NEFT etc and never in cash.

Also, payments made towards preventive care health check-ups are also tax deductible. These payments can be made in cash.

The deductible amount allowed for senior citizens can also be used for their medical costs. With careful planning, you can thus extend the tax benefits accruing from a single premium payment on a health insurance policy.

Choose your policy carefully

It is important to choose the policy you go in for and the amount you need to invest in it. Remember, a health insurance policy is not only a tax saving instrument. It serves two purposes – primarily covers medical treatment costs and also saves you some tax. Therefore, apportion weightage to these two factors accordingly while deciding on the policy and amount.

If it is an individual policy, consider factors such as age, health condition, risk factors and other covers such as group insurance cover from your workplace. Here, you can plan your personal policy as a long-term insurance as every year the non-claim bonus will help you get a higher insurance sum, thereby building you a tidy sum by the time you retire and don’t have the office cover any longer. Many people don’t go in for a personal cover only because they have one from the organisation they are working for. This can be disastrous. In case of job loss or the organisation closing down, the individual is left out in the cold without insurance. Remember, buying an insurance in the later years is very expensive.

If it is a family health insurance policy, choose an amount considering the healthcare needs of all members covered. Go in for a higher amount if you have more people in the higher age bracket. Ensure you claim the higher deduction available. *

Buy peace of mind

In this day and age, people need to be free of as many worries as possible. Expensive healthcare is definitely a worry. A prudent health insurance cover will give you that much-needed relief in case of an unfortunate health incident in the family.

Some costs need to be factored in for sure. For example, there are strong possibilities of needs such as cataract surgery if there are senior citizens in the family. Preventive check-ups are a must for everyone beyond a certain age too. With the options in high-tech treatment these days, insurance is both an investment and ticket to good health. *

* Standard T&C Apply

Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read sales brochure/policy wording carefully before concluding a sale.