While maintaining good health should be the primary focus of every individual, given the very increasing cost of healthcare in our country, buying a health insurance becomes a must too. Apart from ensuring financial preparedness at the time of medical emergency, health insurance also provides an addition benefit of tax deduction. Last week in this column, we dealt with the deductions available for individuals and HUF under section 80C and 80CCC of the Income Tax Act with a limit of Rs 1,50,000 under various schemes. This week, we turn our attention to section 80D of the Income Tax Act — Mediclaim.
Mediclaim: Sec. 80D
Health insurance premiums paid by an individual for himself and his family and by an HUF for any of its members, along with expenses incurred on preventive health check-up is deductible up to Rs 25,000. In the case of single premium health insurance policies having cover of more than one year, the deduction shall be allowed on proportionate basis for the number of years for which health insurance cover is provided. For senior citizens, the limit is higher at Rs 50,000 if they are not covered by health insurance. In view of this, it is advisable not to cover your parents in your family policy if they are senior citizens. The premium for family policy depends on the age of the oldest member of the family besides the sum assured. Getting independent covers for each family member can sometimes be cheaper.
The premium is required to be paid in any mode other than cash, except for preventive check-ups.
Before entering into a contract with an insurer, compare the premiums offered by the insurers satisfying your needs.
If you find that you will do well by porting (= shifting) your policy to another insurer you can do so 45 days prior to the renewal of the existing policy and have to complete the process within 30 days of the renewal date. Moreover, the new insurer may not be interested in taking you under its wings, unless it is absolutely sure that the health condition of all your family members is fine. You may do well to shift over to another plan suiting your needs of the same insurer.
Many individuals either have not understood the importance of preventive check-up or having understood, neglected it because of the cost. Now, this special deduction u/s 80D would prompt one to go to doctor regularly. The facility should not be misused by obtaining a fake certificate from a friendly doctor.
Mediclaim is recommended to all, taxpayer or otherwise, rich or poor, in view of the high cost of hospitalisation. Unfortunately, cover related with any stay abroad requires a separate policy.
It is better to buy a health insurance policy when you are young as there are fewer comprehensive health insurance policies available for elders.
Some policies offer a cumulative bonus of 50 per cent for every claim-free year. Consequently, even if it is a Rs 10 lakh floater policy, the sum insured doubles at Rs 20 lakh if there are two claim-free years.
Many of the employees find that their employer provides medical cover for them as well as their family members. Medical inflation is growing at such a fast rate that this cover may not be adequate. It is advisable to either buy a top-up policy or a fresh policy, which can come into play after coverage under employer's policy has been exhausted. A fresh individual health policy is advisable as there won't be any employer-provided medical cover when you shift job to an employer who does not provide the cover.
Next time we shall examine additional deductions available under additional Sections.
The authors, A.N. and Sandeep Shanbhag, are leading financial advisors. Write to them at email@example.com