Invest in Right Health Insurance Policy and Save taxes
A health insurance policy is one of the best ways to get quality medical care for yourself and your family without straining your finances. Apart from this valuable benefit, a health insurance policy is also known as one of the best income tax saving schemes. The premiums you pay towards a health plan are eligible for a tax deduction as per the IT Act.
Unfortunately, a lot of individuals purchase a health policy to save taxes. When the due date for filing tax returns is close, people buy the first health policy they come across in the bid to save taxes. While this practice can provide tax savings, you might end up with a policy that is not right for you.
If you are purchasing health insurance, then why select something random and not buy a policy that is in line with your requirements? Before talking about the points to look into while buying a health plan, let us first have a look at how much tax you can save with the purchase.
Saving Taxes with Health Insurance
As per Section 80D of the IT Act, you can save up to Rs. 25,000 in a year by purchasing health insurance. Thus, premiums of up to Rs. Twenty-five thousand can be deducted from your taxable income in a financial year. This rule applies to policies purchased for yourself, spouse, children, and parents under 60 years.
If you are purchasing a policy for your parents who are above 60 years, the tax deduction limit is up to Rs. 50,000. So, for instance, if you purchase a policy for yourself and your parents who are above 60 years, the maximum deduction limit will be up to Rs. 75,000 in a financial year. If you, as well as your parents, are above 60 years, this limit will be up to Rs. 100,000.
The below table will give you a clear picture on how much tax deductions you will be allowed-
Tax Deduction Available
Health insurance for you, your spouse, and children
Health insurance for your parents above 60 years
Now that you know the relationship between income tax and medical insurance let us have a quick look at some of the critical factors you should take into consideration at the time of purchasing a health policy-
1. Coverage Offered
One of the most important things you should look into is the coverage offered. Most top insurance providers now offer different types of individual, family floater, and group health insurance plans. If you are looking for an individual plan, select one that comes with benefits such as pre and post hospitalisation, ambulance cover, and day-care expenses.
It should cover a host of medical conditions, including the ones that you are more likely to suffer from based on your age, lifestyle, and family history. If you are going with a family floater plan, make sure that it meets the medical requirements of each member of your family.
2. Claim Process and Claim Settlement Ratio
The claim filing process of the insurance provider should be quick and straightforward. There should be multiple ways to file a claim to help you save time or effort in case of a medical emergency.
Also, do check the claim settlement ratio of the insurance provider. This ratio is calculated based on total claims received by the company and the total claims settled in a year.
3. Network Hospitals
Cashless claims eliminate the need to clear the hospital bills and then get it reimbursed from the insurance provider. But this facility is only available at the network hospitals of the insurance provider.
So, ensure that the insurance provider you select has plenty of network hospitals close to your location and the city where you reside. The reimbursement facility can be used at non-network hospitals.
You will need health insurance the most in the later years of your life. But know that not every health insurance plan comes with lifetime renewability. Once you reach 50-55 years, you will no longer be able to renew such policies.
Thus, it is better to prefer policies that come with lifetime renewability. These policies make sure that even senior citizens have adequate health protection. This will also help you benefit from the income tax saving feature of health insurance for a longer duration.
5. Purchase Policy Online After Comparing Quotes
Thanks to the Internet, you can now easily compare health plans offered by different insurance providers online. You can also request quotes from insurance providers by filling a short online form. The insurance provider will then get back with a personal quote for you.
Use this facility and get quotes from at least a few top insurance providers to make the right selection.
Start Looking for Health Insurance in Advance
While one of the most common income tax-saving tips is to purchase health insurance, you should not wait for the returns-filing due date to procure a policy. You are most likely to end up with a wrong policy in the rush of purchasing before the ITR-filing due date. So, start looking for health insurance in advance and keep the points mentioned above in mind to make the right decision.
Always prefer a reputed insurance company that offers several health plans to pick one that best caters to you and your family's healthcare needs.