Tax Benefits of Buying a Single Premium Health Insurance Policy

Including health coverage in your insurance portfolio is of utmost importance. With the constantly rising healthcare costs, you may find yourself in a tough position in case of any medical condition.

You may argue that your employer provides health coverage under the group insurance policy. However, such coverage is often limited and inadequate to meet the costs in case the need arises. Supplementing your group insurance cover with an individual plan is, therefore, recommended.

An individual health insurance plan is an agreement between the insurer and you wherein the former guarantees to pay for certain costs incurred in case of any medical condition. Here are the key features of an individual health insurance plan.

  1. Covers hospitalization expenses
  2. Pre and post-hospitalization costs
  3. Organ donor expenses
  4. Hospital room choice
  5. Road ambulance coverage
  6. Emergency assistance services
  7. Hospital cash benefit
  8. Rewards for a healthy lifestyle

Benefits of individual health plans

  • The entire sum assured is available to you. In comparison, if you avail of a family floater cover, the sum assured is distributed among all the covered family members.
  • Most insurance companies do not have any limitations on the maximum age at the time of policy renewal. However, it is important to check the restrictions on the age at the time of entry.
  • You may make multiple claims during the year until the entire sum assured is exhausted. Therefore, you enjoy the flexibility of claims, which may not be available under family floater because the entire sum assured is already exhausted.
  • The insurance companies often tie-up with hospitals and other medical facilities to offer cashless services to their policyholders. Therefore, you do not have to pay the hospital bill and wait for reimbursement when you seek treatment within the network facilities.
  • Insurers offer No Claim Bonus (NCB) for every year during which there is no claim. This bonus is available as an enhanced sum assured, which varies from one company to another. Moreover, if you make a claim during the subsequent years, you are assured that this no claim bonus is not lost.

In addition to the aforementioned beneficial key features, the premiums paid on such policies qualify for certain health insurance tax benefits. Here are the tax benefits of an individual health insurance plan.

  1. Premium amount

The amount paid as premium towards procuring health insurance coverage is eligible for tax deductions according to section 80D falling under the Income Tax Act, 1961. The maximum 80D health insurance deduction is limited to INR 25,000 per year. If you are over the age of 60, the deduction increases to INR 30,000 per annum. After the announcement made at the Budget 2018, the deduction for senior citizens has increased from INR 30,000 to INR 50,000 per annum. This change will come into effect from Assessment Year 2019-20 onwards.

  1. Preventive health checkups

In addition to the tax benefits available on the premium amount, deductions are available for expenses incurred towards preventive health checkups. Within the section 80D mediclaim tax benefit, an amount of up to INR 5,000 may be claimed as a deduction towards the annual preventive health checkup.

  1. Premium paid on behalf of parents

If you procure health insurance coverage for your parents, you qualify for a deduction of INR 25,000 per annum. Moreover, if either of your parents is older than 60 years, the eligible 80D health insurance benefit increases to INR 30,000 per year. However, as per the Budget 2018, if your parents are senior citizens, the deduction amount will be raised from INR 30000 to INR 50000 per year. This change will come into action from Assessment Year 2019-20.

  1. Treating specified ailments

An amount of up to INR 1.4 lakh (INR 80000 for seniors over 80 years and INR 60000 for seniors over 60 years) is available as a deduction under section 80DDB. This amount must be incurred towards the treatment of specified ailments, such as renal failure, cancer, Parkinson, and others. This mediclaim tax benefit is available for self, spouse, children, parents, and siblings. After the Budget 2018 announcement, this amount has been increased to INR 1 lakh for both senior citizens as well as very senior citizens. This change will be implemented from Assessment Year 2019-20 onwards.

Claiming health insurance benefits may seem confusing and daunting. In case you are unsure about these advantages, it is recommended you seek the advice of a qualified accountant to understand more about the health insurance tax benefits.

Get health insurance and safeguard yourself against medical emergencies.