Health insurance serves the critical purpose of providing financial support in case of medical emergencies. Besides safeguarding your savings, buying adequate health coverage also comes with certain tax benefits. Understanding these perks can give you more reason to invest in a comprehensive health plan.
What is Health Insurance?
Health insurance essentially serves as your safety net in case any medical emergencies arise. It pays for not just hospital room rent but also expenses incurred on medicines, tests, doctor fees, equipment charges etc. Based on your policy coverage, insured amount and terms & conditions, it cushions you to a large extent from self-funding expensive procedures.
Based on the type of policy you choose, health insurance can offer coverage for daycare procedures, pre- and post-hospitalisation charges, ambulance fees, etc. Many plans also include preventive health checks and maternity benefits.
Tax Benefits of Buying Health Insurance
The main tax benefits linked to health plans are under Section 80D and Section 80C of the Indian Income Tax Act.
Section 80D Deductions
Here’s how it works – under section 80D of the IT Act, you can claim deductions on the premium you pay every year for health policies. This includes plans bought for yourself, your spouse, kids as well as your parents.
The maximum deduction is ₹25,000 for premiums paid for covering your immediate family. But there’s a sweetener. If you purchase policies for parents above 60 years of age, you can claim an additional ₹25,000.
For instance, if you fall under the 30% tax bracket, this deduction would roughly translate to tax savings between ₹7,500-15,000 depending on how many family members you get insured. So buying health plans doesn’t just offer financial cushions but also neatly helps cut tax outflow.
Section 80C Benefits
Certain health plans also offer combined cover for critical illnesses and personal accidents along with hospitalisation. Premiums paid under these policies are eligible for deduction under Section 80C up to ₹1.5 lakhs.
So, by investing in these combo insurance plans, you can claim deductions under both Section 80C and 80D.
Note: The tax benefits mentioned above are subject to the tax regime you have opted for. Do check if they are applicable to you.
Other Benefits of Buying Health Insurance
Along with tax perks, sufficient health insurance brings you numerous other financial and mental benefits:
Comprehensive Cover
Health plans provide extensive coverage, including hospital charges, medicines, diagnostic tests, doctor fees, and pre-and post-hospitalisation expenses. Some policies also cover daycare procedures.
Cashless Facility
Most insurers offer cashless hospitalisation, allowing you to receive urgent care without having to arrange funds instantly. The insurer directly pays the hospital up to your policy limits.
Freedom of Choice
You have the flexibility to choose any hospital for treatment and are not limited to insurer’s network hospitals. This allows you to access the best quality care.
Customisable Protection
You can enhance the scope of coverage by adding a critical illness rider to get a lump sum payout on diagnosis and a maternity rider to cover pregnancy costs. Opting for super top-up plans also boosts overall cover.
Tips to Choose Health Insurance
Analyse Your Needs
Assess your existing health conditions, family medical history, lifestyle diseases, probable risks, and expenses you may need coverage for, before zeroing in on a plan. This will help identify an ideal coverage amount.
Compare Policies
Compare offerings from multiple insurers in terms of premiums, waiting periods, inclusions, exclusions, co-pays, claim settlement records, etc., before deciding. This will help you find the most suitable and affordable policy as per your budget and needs.
Add-on Covers
Enhance your coverage by opting for relevant add-on plans like critical Illness Rider for lump sum payout on diagnosis of severe conditions. Maternity riders also come in handy in providing much-needed financial support.
Preferred Provider Network
Check if your insurer has a strong network of quality hospitals in your location for seamless cashless access whenever needed. Go through the list of network providers before you make a decision.
Claim Settlement Ratio
Review the claim settlement ratio of insurance providers before buying. High CSR indicates timely claim processing and enhanced peace of mind.
Summing Up
Health insurance not only safeguards your savings in times of medical contingencies but also helps save taxes. Based on the number of members you cover under your plan, you can reduce your tax liability by ₹15,000-50,000 under Sections 80C and 80D.
Carefully evaluate your insurance needs, compare offerings across providers and buy plans that give you holistic health protection. This way, you can make the most of the financial and tax benefits linked to health plans.
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