Medical insurance: Take precaution against a medical emergency

Your best laid financial plans can fail without medical insurance. Medical care is expensive, and failure to have medical insurance can erode substantial savings or investments. Medical emergencies arise when you least expect, threatening to disrupt your and your loved one’s life. Medical insurance guards you financially against such contingencies. 

Sound financial planning requires insurance to be an essential component of your financial and family plans. Medical insurance does not yield returns, unlike other financial products. Instead, it aids you in meeting medical treatment costs. You can obtain medical insurance for yourself, spouse, dependent children and parents.

You have the below options while buying medical insurance:

1. Yearly premium policy
2. Multi-year premium policy

An annual premium policy requires you to pay the medical insurance premium each year as and when it falls due. You can claim a tax deduction of the premium paid subject to the conditions discussed below. The premium increases each year gradually for an increase in the age of the insured.

A multi-year policy offers discounts in comparison to a yearly premium policy. The premium paid can be apportioned equally for tax deduction over the number of years of payment. 

Also Read: Factors to be considered for choosing the new tax regime under Budget 2020

The following income tax deduction for medical insurance premium is allowed under section 80D:

1. A maximum of Rs 25,000 for the premiums paid for self, spouse or children; or a maximum of Rs 50,000 in case of self, spouse or children are 60 years and above.
2. In the case of premiums paid for parents, a maximum of Rs 25,000 for parents or if parents are 60 years and above, a maximum of Rs 50,000 for parents.

In case of preventive health check-up for self, spouse, dependent children or parents, an amount up to Rs 5,000 is allowed as a tax deduction. Do note that the deduction is permitted within the limits mentioned above. The deduction for medical insurance payment has to be made through a bank to avail a tax deduction. However, the deduction for preventive health check-up can be claimed even in cash. 

The medical treatment of many life-threatening diseases is quite expensive and can pile up debts on the family. If the insured is the only bread earner in the family, the medical costs can jeopardise the financial stability of the family. Also, with an increase in age, the medical costs increase too. 

Both the young and the old are easily susceptible to medical illness and need medical care. Medical insurance protects you and your family against any medical emergencies and substantial financial costs.

For any clarifications/feedback on the topic, please contact the writer at sweta.dugar@cleartax.in