People pay attention to their investments, savings, and loans, but often forget the importance of health insurance when planning their lives or taxes.
With the cost of healthcare rising exponentially as the years go by, having a comprehensive health insurance policy should be a necessity rather than an afterthought. It is not just chronic diseases or lifestyle-related illnesses that we are battling with now, but also pandemics like the coronavirus that is concerning, to say the least.
People pay attention to their investments, savings, and loans but often forget the importance of health insurance when planning their lives or taxes. Those with an employer’s group health insurance policy often think that it will be enough to cover any unforeseen expenses but such policies have their limitations. To be on the safer side, it is important to have an individual health insurance policy, or a family floater plan, that will provide full coverage for you and your dependents in case of any medical emergency.
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Not only will this save you from paying for medical expenses out of your own pocket (which could drain your savings or prematurely liquidate critical investments at a loss) but it will also give you peace of mind that is priceless. Knowing that you can afford the best medical care for your loved ones or yourself relieves you from unnecessary stress.
However, did you know that your health insurance policy can also provide you with valuable tax benefits? If you have not taken one yet, and are looking for last-minute tax-saving instruments, you might want to consider signing up for a health insurance policy. Get tax benefits and health insurance cover all at one go.
Here is all you need to know about health insurance with its associated tax benefits:
1. The amount of coverage you need: Whether it is a simple procedure or a life-saving operation, the rising costs of healthcare means that you will be looking at a bill that runs into thousands, if not lakhs, of rupees. The cost of hospitalisation could be equivalent to the cost of surgery. Taking into account rising inflation as well, it would be wise to choose a sum insured that starts at Rs 5 lakh, at the very least.
2. Coverage for the entire family: If you have a family with several dependents, it may be more cost-effective to choose a family floater plan that covers you all instead of individual health policies for each member.
3. Senior citizens health insurance: If you have parents or in-laws that are dependent on you, it may be wise to look into a separate senior citizens health insurance policy for them, instead of including them in your family floater plan. This is to ensure that they get adequate coverage for all age-related illnesses, which may be more expensive than others. This ensures that the rest of your family members too have adequate coverage.
4. Boost coverage with a super top-up health insurance policy: A super top-up plan gives you added coverage when you have exhausted the sum insured from your existing health insurance plan. In the case of any unforeseen medical emergencies, this can be a boon so that you don’t end up dipping into your savings or taking a loan to meet the unexpected medical expenses. This can be taken as a floater policy too that covers all your dependents.
5. Section 80D deductions: Under Section 80D of the Income Tax Act, you can claim up to Rs 25,000 in tax deductions for health insurance taken for yourself, spouse, and dependent children. If you have taken health insurance for your parents, you are eligible to claim an additional deduction of up to Rs 25,000. This is for parents who are below 60 years of age. If they are above 60 years, you can claim up to Rs 50,000 as a deduction. If both you and your parents are above 60, the maximum deduction that can be claimed is up to Rs 1 lakh.
6. Deduction for paying a single premium: If you have paid the premium as a lump-sum for the year for a policy that has been valid for at least a year, you are eligible for a deduction that is equal to a specified fraction of the amount. This amount is calculated by dividing the lump-sum of the premium paid by the number of years of the policy. This is subject to the existing deduction limit as mentioned above.
7. Deduction for preventive health checkup: You also get a deduction of up to Rs 5,000 towards the cost of preventive health checkups. This is applicable if you pay in cash. This can be claimed for yourself, spouse, dependent children, or parents. Again, this is within the overall limit mentioned previously.
With so many tax benefits as given above, taking a health insurance policy might be the best thing you can do to complete your tax planning this year.
(The author is CEO, BankBazaar.com)