With rising medical bills and health care expenditure, it becomes critical to invest in a health insurance policy to fall back on. The policy is a long-term commitment to safeguard you and your family in case of an unannounced health crisis.
In an average Indian household, the eldest member is generally the breadwinner and supports three to four other family members. Taking into account this scenario, healthcare becomes an excessively expensive proposition. Additionally, most Indian families have savings in the form of fixed assets, which are not as simple to liquidate in times of emergency.
It isn’t uncommon to witness situations wherein the primary earning member suffers from a critical illness, leaving the other members under the reel of a severe cash crisis. Ultimately, it gets difficult for the family to repay debt or even afford the cost of the treatment. Thus, investing in a health insurance plan is a sensible move with regard to your own and your family’s health. During an emergency, you can rely on the health insurance company to take care of your medical expenses.
Benefits you can’t ignore
Today, health insurance has become a necessity, considering the many health hazards we are prone to. Keeping this in view, health insurance has now become an indispensable part of one’s future financial planning, and rightly so!
In the last few years, medical expenditure has grown exponentially and it is almost impossible for most people to cope up with the rising costs. However, if you opt for the right health insurance plan, you can save money! Often, there’s a misconception that health insurance is only about compensation of medical expenses, but there’s much more to it. You would be surprised to know that your plan also acts as an efficient tax-saving tool and facilitates tax exemption under section 80D of Income tax act, 1961.
Just some simple calculation
Under section 80D of the Income Tax Act,1961 the premium you pay annually for a health insurance plan provides a tax benefit by reducing your taxable income and thereby, your tax liability. However, the quantum of tax benefit is dependent on the age of the individual who is medically insured. On the premium paid for self, spouse, children or parents, the maximum deduction that can be availed is Rs 25,000/year (if everyone is below 60 years). If the premium paid is for a senior citizen above 60 years, the upper limit has been revised to Rs 50,000/year (from Rs 30,000/year), as per the Budget 2018-19.
Furthermore, you can claim up to Rs 5,000 on expenditure incurred on preventive health-check-ups of your parents, family or for yourself. However, this deduction is not in addition to the maximum deduction, but is included in it.
Here is another scenario, wherein you or any other member of your family is a super senior citizen (above 80 years), but is not covered by any health insurance. In this case, you can avail a tax deduction of up to Rs 30,000.
The tax deductions stated above have been summarized:
|Health Insurance Policy Premium & Section 80D Tax Benefits for AY 2018-19|
|Scenario||Self, Spouse and Dependent Children (Rs.)||Parents (Whether dependent or not) (Rs.)||Total (Rs.)|
|Self and Family||25,000||NA||25,000|
|Self and Family + parents||25,000||25,000||50,000|
|Self and Family + Senior citizen parents||25,000||50,000||75,000|
|Self (senior citizen) and family + senior citizen parents||50,000||50,000||100,000|
NOTE: Section 80D has been bifurcated into two more sections for specific insurance requirements.
- Section 80DD – You can avail a tax benefit of up to Rs 75,000 basis the expenses incurred for nursing, training or rehabilitation of a dependent with disability. In case of an extreme situation, the benefit goes up to Rs 1.25 lakh. In either of the cases, a supporting medical certificate has to be submitted as proof.
- Section 80 DDB- In a scenario where medical expenses have been incurred on critical ailments (cancer, chronic renal failure, Parkinson’s disease etc), a maximum deduction up to Rs 1.4 lakh can be availed (Rs 60,000 for senior citizens and Rs 80,000 for super senior citizens). It is mandatory to attach a medical certificate while filing income tax.
Key Points of Consideration
- Understand your family’s needs – Although having a health insurance plan is important, it is always advised to first gauge your family’s requirements. Let’s take a common scenario – suppose your father has to undergo surgery in the next year, it will be a sensible move to go for a health insurance policy that provides coverage for the surgery. Do not completely rely on your employers’ group health insurance policy, as this may only cover the partial expense.
- Always go with a Lifelong Policy – With rising medical expenditure, it is best to enhance coverage for your parents. Remember, the earlier you buy a lifelong policy for your parents, the better will be the benefits. Many policies have restrictions in cover if the individual enters into coverage at a higher age, however, there are other insurers in the market that offer plans irrespective of your parents age.
- Be honest about the Current Health status – While you are upbeat about choosing the right health insurance policy, make sure you share the health history of your parents honestly with the insurer. Any falsification of the proposal form in context to the medical history of your parents may lead to termination of the policy.
Procedure for making claims under health insurance
While the claim policy varies from company to company, the procedure to go for a cashless claim remains the same:
- You must be admitted to any of the authorized hospitals in the network
- Next, fax the completed pre-authorization form to the insurance company or ThirdParty Administrator (TPA)
- The insurance company cross-verifies the claims you had raised
- Finally, after proper scrutinisation of all the documents submitted, the insurance company settles the claim directly with the authorized hospital
Here are a few things to keep in mind:
- Opt for a health insurance that covers critical or extreme illnesses that are likely to cause severe financial damage.
- Always compare the quotes before you find the best coverage suited to your needs.
- Buy policies at a young age because the older you grow, the higher premium, you are required to pay.
- Be sensible while incurring medical expenditure on minor ailments. In case you do not need a specialist, refrain from going to one, since most specialists charge steeply.
Among other things that you could do are:
- If you smoke, then it is better to quit smoking (as this could save you approximately 5% off of your premium).
- If you drink alcohol, it’s better to quit.
- Always try to maintain a healthy weight.
It is always advised to keep yourself abreast of the current health insurance rates. This will eventually help you to build your savings. Besides, re-evaluate your plan from time to time, so you can go for an alternate policy based on your needs.
Being a wise spender is not about depriving yourself of essential medical care, it is about making a sound judgement for a better future.