Health insurance, also called mediclaim or medical insurance, has made life really easy. Health insurance reimburses hospitalization expenses. A health insurance plan is very important as medical inflation soars. Health insurance is offered with substantial flexibility and sub-limits. It is left to your discretion to avail single or multi-year health insurance plans. This article covers the tax benefits on a multi-year health insurance policy.
What are individual and family floater health insurance plans? The health insurance plan which covers only you (no other family members) for hospitalization is an individual health insurance plan. The family floater health insurance plan covers the entire family on payment of a single premium. Any family member can avail the benefits of family floater health insurance plan.
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The proposals made in the Union Budget 2018-2019 are in favor of people seeking multi-year health insurance policies.
See Also: Family Health Insurance Plan
If your existing health insurance plan is nearing expiry, you may choose a multi-year health insurance policy by paying a single premium. Such health insurance policies offer lucrative benefits and are usually offered at a discount. When you avail a multi-year health insurance policy by paying a single premium, you may claim the tax deduction across the policy tenure if the single premium exceeds the total tax deduction allowed under Section 80D of the Act. How is this so?
Let’s say you are in need of a health insurance plan, for a family of 4 (You, spouse and 2 children). For a given sum assured, an insurer is asking you to pay a premium of Rs 25,000 a year. For the following year, you are expected to make the same premium payment or more. The insurance company is offering a discount of 7.5% if you buy the health insurance policy for 2 years. After the discount, the single premium works out to be Rs 46,250.
In the first year, you can enjoy a tax benefit of Rs 23,125, which is 50% of the single premium paid. A tax benefit can be claimed in the following year as well. Normally, insurers issue a certificate stating the tax benefit. The biggest advantage of multi-year health insurance policies is that the single premium gets locked-in for the term you choose, which could be 2 years or more. This facility can be availed in case of non-cash payments.
See Also: Health Insurance Benefits
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