A medical insurance is not just health smart but also tax smart…

Today medical costs have shot through the roof and it is impossible for a person to bear the costs of hospitalization from his own pocket. The answer is medical insurance. Medical insurance covers you and your family against hospitalization and related expenses so that your finances are not strained and your financial goals are not negatively impacted. People need to understand the benefits and the tax implications of medical insurance clearly to be able to make the best of this facility.

What is Medical insurance all about…?

Medical insurance is a non-life cover which covers you against the cost of hospitalization and other related expenses. It needs to be remembered that the coverage is not just about being admitted to a hospital. Even appointing a nurse at home for home care, convalescence can be covered under medical insurance subject to prescribed limits. Most insurance companies offer cashless facility wherein one can straight away get the approval in advance and admit a person by paying a small token sum. The insurance company arranges to directly pay the hospital for the entire bill amount. This ensures that people are not subjected to acute liquidity constraints in the event of sudden hospitalization.

How and for whom can you buy medical insurance…?

Under the Income Tax Act, you are eligible for tax benefit for medical insurance bought for yourself, on behalf of your spouse and dependent children as well as your dependent parents. Remember, medical insurance can be a stand-alone policy or a floater policy. A floater is a more economical policy that reduces your premium by sharing the total corpus coverage among family members For example, in a stand-alone policy I can buy an INR5 lakh cover for each member of my family. But in case of a floater policy, my entire family can be covered for Rs.10 lakh and all members can use the floater up to the maximum of Rs.10 lakh. A floater ensures that your policy is not wasted and you do not end up paying unnecessarily high premium. Today it is possible to buy medical insurance online at the websites of most insurance companies based on a declaration of good health. Of course, in case of persons above 45 years of age, medical test is a must.

Tax benefits of medical insurance…

Contributions towards recognized medical insurance policies are eligible for additional tax benefits under Section 80D of the Income Tax Act. This benefit is over and above your other sections like Section 80CCD. Under the Income Tax Act amendments made in Budget 2015-16, medical insurance premium up to Rs.25,000/- per year paid for the life of the insured and his spouse and children is eligible for full tax deduction. In addition, there is a supplementary tax break of Rs.30,000/- per year for medical insurance premium paid on behalf of your parents who are senior citizens. Thus you are eligible to claim up to a maximum of Rs.55,000 as premium towards medical insurance. There is one more interesting clause that has been inserted in the latest budget. In case of Very Senior Citizens above the age of 80 years, they may not be eligible for medical insurance. Hence any medical expenses incurred for them will be eligible as a tax rebate under Section 80D up to a maximum of Rs.30,000 per annum.

Some points to remember in a medical insurance…

Remember to make a clear disclosure of all your known existing problems to the insurance company. If at a later stage it is found that you had failed to disclose any problem, your medical insurance claim can be rejected under IRDA guidelines. Secondly, the benefit under Section 80D can be claimed only if the premium is paid other than by cash. Payment by cheque, demand draft or by NEFT is permissible. If you have paid medical insurance premium by cash, your claim for tax deduction is liable to be rejected. Thirdly, read the fine print of any health policy. Most policies do not cover select diseases for the first 1 year and such claims are likely to be rejected. Also certain specified surgeries like bariatric surgery, prosthetic limb surgery, plastic surgery etc are not eligible for hospital reimbursement. Lastly, while filing the medical claim remember to attach all original bills, prescriptions, medical reports and the cover stamp of any expensive surgical disposables purchased. These are a must to ensure a smooth clearance of your medical insurance claim.

To sum up, a medical insurance or a health insurance as it is known nowadays is not just about covering your medical expenses but also about ensuring that you do not get financially burdened. Secondly, the tax benefits are many and you can get a good rebate on your tax liability. The sooner you get the medical cover the better as you are likely to lock into a lower premium.

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