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Home Articles Tax Benefits on Multi Year Health Insurance Policies

Tax Benefits on Multi Year Health Insurance Policies

IndianMoney.com Research Team | Updated On Thursday, June 20,2019, 03:51 PM

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Tax Benefits on Multi Year Health Insurance Policies

 

 

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.

Want to know more on Health Insurance? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

Tax Benefits on Multi-Year Health Insurance Policies

Tax Benefits Under Section 80D of the Income Tax Act, 1961

The proposals made in the Union Budget 2018-2019 are in favor of people seeking multi-year health insurance policies.

  • A policyholder, who pays the premium for self, spouse and children on health insurance plans, enjoys a tax deduction of up to Rs 25,000 a year and an additional tax benefit of up to Rs 25,000 a year on the premiums paid for his/her parents under Section 80D of the Act. (Parents must be under 60 years of age).
  • If a health insurance policyholder is below 60 years but his/her parents are senior citizens, the tax deductions on the premiums paid for parents on health insurance plans would increase to Rs 50,000 instead of Rs 25,000 a year.
  • When a policyholder and his/her parents are senior citizens, he/she gets a tax deduction of up to Rs 50,000 a year on the premium paid for self, spouse and children and Rs 50,000 a year on the premium paid for his/her parents for the health insurance plan.

See Also: Family Health Insurance Plan

How to Claim Tax Benefits on Multi-Year Health Insurance Policies?

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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