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The most neglected is health insurance. Most often this tax saving instrument is brushed aside with the logic that after all it’s an expense (no monetary gains) and well we all save for the “rainy day”. So why incur an additional expense? The moot point – Is it truly an additional expense?
It’s soon going to be time for filing income tax returns. Most of us will be in a hurry to make the most of the tax deductions available. It’s done in haste to meet the deadlines. How many of us look at tax planning from a holistic perspective? How many of us have discussions on what would be the best tax saving instrument to utilise from a variety of perspectives- returns, coverage, benefits among others. The most neglected is Health Insurance. Most often this tax saving instrument is brushed aside with the logic that after all it’s an expense (no monetary gains) and well we all save for the “rainy day”. So why incur an additional expense? The moot point – Is it truly an additional expense?
Why should Health Insurance be given due consideration?
- Medical Inflation: Prices of medicines and treatment are constantly on the rise making it difficult to rely on savings.
- Lifestyle related issues: Increase in incidence of medical problems due to t he stressful environment we work in
- Change in the eating habits – fast food and meals at irregular hours Irregular sleep patterns
- Dependents: If you have dependents and are overwhelmed with responsibility, the health insurance coverage can come to your rescue.
- Health insurance coverage will release you from the burden of worrying how much to save for the rainy day. After all how much is enough?
Case Study
Imagine a situation where due to a medical emergency Mr. X had to be admitted to a hospital for an operation and the bill comes to a whopping Rs. 1 lakh- Guess what? Mr.X does have health coverage which covers this medical emergency and is within the overall limit. Mr. X would not have to shell out a penny. Neither Mr. X nor his family will have to undergo any financial strain. Isn’t the premium more of an investment than an expense? So what if there is no claim every single year. Didn’t it help Mr. X reduce the burden of worrying on an important parameter- saving for health related emergencies? Besides, most insurance companies provide some incentive for every claim free year (5% is added to the sum assured).
Your work does not end at making the decision of buying a health insurance product, choosing the right one is equally important. There is a bouquet of products in the market offered by several public and private insurance players. Earlier only general insurance companies and pure-play health insurance companies offered health related products but now even life insurance companies have entered this domain. So in all you have almost 30 players in the market offering health insurance products- A wide basket to choose from.
Types of Health Insurance Plans: A Brief Snapshot
Individual Health Plan: These are commonly known as mediclaim policies. They mainly cover hospitalisation expenses provided it is for at least 24 hours. Usually pre-existing diseases are not covered. Claims for specific ailments may not be allowed in the first or second year. For every claim-free year, most plans add 5 per cent to the sum insured.
Family Floater Policy: As the word suggests, this is a plan that will cover members of the family. Single premium is to be paid for the entire family. The benefits of the policy are similar to the individual health plan except for the fact that the sum insured can be availed by any or all members of the family and not a single person. Thus it has an advantage over an individual plan if more than one plan is required in a family. E.g. If a one lakh policy is required person, your family will need two individual policies if there are two people. Instead, if one family floater policy is taken for the two of them, for two lakhs, the coverage for each member will be Rs. 2 lakhs unlike the individual plan where the coverage per person is one lakh.
Critical Illness Plan- Add on: This product is not a substitute for any mediclaim plan (simple traditional product); instead it is a rider that could be added to it. This rider provides coverage if the insured develops a list of ailments spelt out by the company, generally of a serious nature such as cancer, coronary heart disease, stroke among others. If critical illness occurs, the company pays the entire sum insured.
Senior Citizen Health Plan: These plans are available for people between the age of 60 and 80 years. The coverage is generally fixed and the policy can be renewed lifelong or in some instance up to the age of 90 years. Read the fine print carefully on illness covered. An add-on in the form of a critical illness plan may be required.
Unit Linked Health Plan: This is a plan that serves dual purpose- coverage and returns. Part of the premium goes towards coverage and the balance is invested in a fund that functions like a mutual fund (a mix of debt and equity instruments can be chosen)
Things that may matter
Read the fine print carefully: The devil usually lies in the details. So a careful reading would help.
Product Details: Make sure you have carefully read about the exclusion of diseases such as pre-existing illness etc. Be aware of the sub-limits in the policy for specific expense heads.
Claim Settlement: There are two ways in which settlements are made. Reimbursements and Cashless settlements. In order to avail of the cashless settlement facility, the network hospitals should be utilised. Make sure you have details on the same. Take note of the time you have at hand to notify the required party for claim. Third party administrators (TPA) handle claim settlement on most occasions. At this point, claims on health insurance are very high in India, so if you want your claim to pass through smoothly, kindly follow the rules outlined.
Documentation: For any claim settlement, proper documentation is a must. Please ensure that documents are kept safely and also keep a tab on the premium payments (monthly, quarterly, semi-annually or annually) else the policy will lapse.
Tax Advantage- An incentive
In order to encourage individuals to invest in health insurance, Section 80 D of the Income tax Act provides a deduction on health insurance premium paid
- Up to Rs. 15,000 for self, spouse and dependent children and
- Additional Rs. 15,000 for parents (Rs. 20,000 in case of senior citizens)
So pick up the phone or surf the net and set the ball rolling. Remember “Health is Wealth”. We all believe in it. It’s now time to act.
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