Use Income Tax Exemption to Enhance Health Cover..!

By Mukesh Kumar, HDFC Ergo General Insurance

Finance minister Mr. Arun Jaitley announced in his Union budget for 2015-16 raised the exemption limits from Rs. 15,000 to Rs. 25,000 for non-senior individuals and from Rs. 20,000 to Rs. 30,000 for senior citizens.

The central government finally accepted the insurance industry’s long-standing request of enhancing the income-tax exemption limit on health insurance premiums.

Section 80D of Income-Tax Act..!

This will certainly help policyholders.

Section 80D of Income-Tax Act provides for tax deduction from total taxable income for a payment of health insurance premium made by an individual (or /  a HUF).

The deduction is allowed for making a payment to purchase or renew a health policy on self, spouse, dependent parents or dependent children.

With the recent hikes, for individuals aged below 65 years, the amount of deduction available has gone up to Rs. 25,000 on health insurance policy for self, spouse & dependent children.

A further deduction of Rs. 25,000 can be claimed for paying the premium for one’s parents. The limit goes up to Rs. 30,000 if either parent is a senior citizen. If the parents are included in the ‘family floater’ plan, the deduction limit goes up to Rs. 50,000 (Rs. 25,000 + Rs. 25,000).

If even one of them is a senior citizen, the deduction limit will be Rs. 55,000 (Rs. 25,000 + Rs. 30,000).

Medical inflation..!

With medical inflation estimated at 15% per annum, the cost of healthcare has been rising steadily since last one decade or so.

Comprehensive health covers providing added layer of protection is the need of the hour.

Amid such possibilities, having a health insurance policy is of utmost importance to cover you & your family against any emergency medical situation.

Interestingly, most policyholders in India cover themselves for about Rs. 2 lakh - Rs. 3 lakh and the average individual coverage under individual health insurance policies is even lower.

Individuals must get realistic while deciding on the level of coverage. Today, even a small routine surgical procedure can easily cost up to Rs. 1.00,000.

A bypass surgery at a reputed hospital costs in excess of Rs. 2 lakh to Rs. 3 lakh today, and will certainly cost more in the next 5 years.

A sum insured that appears sufficient today may be inadequate to cover your healthcare expenses in the next few years.

So, it is advised to factor in the inflation before deciding on the sum insured.

With hospitalisation getting costlier every year, we strongly recommend the policyholders - especially the salaried individuals - to utilise a part of the savings - in terms of increased income tax exemptions - in enhancing their Health Insurance coverage.

You can substantially enhance your health cover - over and above your basic policy - with tools like riders and top-ups without corresponding increase in the premium.

A rider is an add-on that gives you additional benefits. Some of the riders commonly available with health insurance policies are critical illness cover, hospital cash benefits, maternity cover, out patient dental, etc.

Availability of these riders depends on insurers and they may not be available with all policies.

Top-up policies..!

These policies can either be taken separately or in addition to the base policy.

Top-up policies, on the other hand, are regular indemnity plans covering hospitalisation, but only after exhaustion of a threshold limit known as deductible.

Deductibles are not covered by the insurance company and have to be paid by the insured.

The deductible clause makes the top-up plans inexpensive because the smaller claims do not need to be paid by the insurer.

When the severity of the illness is high (like a heart problem), which can push your basic treatment cost to Rs. 5 lakh or more, the Top-up cover can be extremely useful.

Mr. Mukesh Kumar is Executive Director, HDFC Ergo General Insurance Company.

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