Insuring the health of your family and (ofcourse) yourself is a no brainer. It has and should be done at the earliest.
Why?
Because if you don’t want to pay large hospital bills from you own pocket, then you need someone else to pay them. And that is what health insurance is all about - the insurance company pays your hospital/medical bills if they ever arise.
So in a way, health insurance is wealth insurance!
If that is not a good enough reason, there is something else that might make you interested.
Tax savings.
Yes. Purchasing health insurance can also help you save taxes. Though that should not be the main reason for purchasing health insurance.
Nevertheless, why say NO to extra benefits (tax saving) you get for doing something wise (insuring health)?
So let us understand how you can save some additional taxes through health insurance plans.
How can buying Health Insurance save taxes?
Under the Section 80D of the Income Tax Act, the health insurance premiums paid by you are eligible for tax deductions.
The deduction is available if you are paying premium for policy/policies that cover you, your spouse, children and parents.
How much tax can I save?
Tax deductibility of premiums depends on the age of the insured person(s).
- Premium paid for self, spouse and children is deductible upto Rs 25,000.
- Premium paid for parents (both less than 60 years) is deductible upto Rs 25,000.
- Premium paid for parents (any one above 60 years) is deductible upto Rs 30,000.
So total deduction available to you ranges from Rs 50,000 (self + parents-under-60) to Rs 55,000 (self + parents-above-60).
Illustration
You purchase a health insurance plan to covers you, spouse and two children. The premium of this plan is Rs 18,000.
You also pay Rs 33,000 as premium for your parents’ health insurance policy. Your father is 62 years old and mother is 59 years old.
Deduction available to you in this case is:
- Rs 18,000 for self, spouse & children (within Rs 25,000 limit)
- Rs 30,000 for parents (only upto Rs 30,000 limit - though you paid Rs 33,000)
Total of Rs 48,000 is deductible. If you belong to 20% tax bracket, this means you save Rs 9600 in taxes.
Note - If your parents are not covered under any health insurance plan (i.e. they are uninsured) and are atleast 80 years old, you can claim upto Rs 30,000 towards their medical treatment/check-ups etc.
Preventive Checkup is also tax deductible
Yes. Tax authorities understand the importance of regular health check-ups and allow expenses of upto Rs 5000 - for preventive health checkups, to be claimed as tax deductions.
But this is within the specified limits of Rs 25,000 (or Rs 30,000 in case of parents above 60) and not in addition to it.
Additional Tax-Savings in Special Cases
There are some other sections too that bring additional relief to people in certain special cases:
- Section 80U - If you are taking treatments for certain disability, then deduction of upto Rs 1.25 lac is available for expenses incurred in your treatment.
- Section 80DDB - Deduction of Rs 40-80,000 is available for expenses in case of specified diseases/ailments. List of such of such ailments is provided in Rule 11DD.
- Section 80DD - Deduction of Rs 75,000 to Rs 1.25 lac is available for expenses incurred in treatment of dependents with disability.
For claiming deductions under these sections, you need to provide proper certificate from competent authorities/doctors.
What should I do?
- Don’t have a health insurance for yourself and family? Purchase one immediately
- Get your parents health insured too. At older age, insurance companies make it difficult to purchase health covers. So purchase one for them at the earliest
- Claim deductions for premiums paid for both self (+family) as well as parents
- Include expenses related to preventive health checkups in deduction too (within specified limits)
Primary reason to purchase a health insurance plan is to protect you against unexpected medical expenses.
If you believe it not worth the cost (it’s very cheap though), then pray that you or your family members don’t get hospitalized - the sky-high hospital bills are very common.
Also, the positive side effect of purchasing health insurance - tax benefit - further strengthens the case for health insurance - which is a vital component in every good financial plan.
