Insurance is not a favourite topic among Indian families, especially, when the discussion revolves around buying health insurance for parents. This is because most of them deem insurance to be an added and unnecessary expense as opposed to a necessary investment. Indian families rely on their savings to pay off their medical expenses, which has resulted in many elderly people or senior citizens remaining bereft of necessary treatment due to a shortage of money.
However, rising medical expenses coupled with the understanding to have financial security in place has resulted in many financially independent adults buying health insurance for parents.
While parents may cringe at the idea of their children buying health insurance policies for them, they must be made to realise that their health condition would gradually wither with age, thus, necessitating them adequate medical support. The financial security promised by insurance companies in return for investment in their health insurance policies, subject to underwriting clauses of the insurer, would not only relieve the entire family of sudden and unwarranted monetary burden but also ensure treatment at hospitals they prefer.
Why do You Need Health Insurance for Parents?
Having health insurance for parents in place saves the elderly and their family from bearing high costs of medical expenditure, and consequent financial instability. This is because costs of getting treated along with associated prices are rising at geometric progression, thus, necessitating to be invested in a security that pays off medical expenses when needed. The amount of premium that one pays regularly is a meagre sum when compared with vast medical bills that one has to pay on the diagnosis of critical illnesses and resulting treatment.
Moreover, while costs of everything including treatment continue to go up owing to the effect of inflation, health insurance premiums do not rise at the same rate. In fact, infrequent claims on your health insurance may result in the insurance company allowing discounts on subsequent premium payments. If you believe that including health insurance plans for parents in your investment portfolio would hurt your pockets, it would be prudent to imagine a scenario akin to a sudden medical emergency. Apart from the money that would be spent on doctor visits and regular tests, you might have to shell out extra for surgeries or transplantations.
The stress that you would have to go through while you see your parents in pain would only worsen when you realise that your savings are not enough to heal them completely or save their lives. The strain of having to break your investments prior to their maturity dates to meet the costs of treatment may also affect your investments adversely.
Tax Benefits on Health Insurance Plans:
Health insurance plans for parents not only assure financial security in times of need but also help to save on tax while filing income tax returns. A lesser-known fact for most people is that the amounts they pay towards premiums of health insurance policies are eligible for deduction under Section 80D of the Income Tax Act. The health insurance policies may cover self, spouse, children and parents. The policyholders continue to accrue tax benefits regardless of the fact that their spouse, children or their parents are dependent on them or not.
However, the quantum of deductions eligible as tax benefits depends on the age of those medically insured. The maximum amount of deduction that one can avail or the amount capped for availing tax benefits is ₹25,000 provided that the age of the policyholder and that of the family members insured is not more than 60 years.
However, if health insurance plans for parents who are more than 60 years old or are senior citizens, then the quantum of deduction goes up to ₹30, 000. This means that if a taxpayer has bought health insurance policy that covers him and his parents, then he can avail a total tax benefit of up to ₹55,000 provided the taxpayer himself is below 60 years of age, while his parents are aged more than 60 years.
These criteria are valid till March 31, 2019, as the regulations of the Union Budget 2018 have laid down a new framework for tax calculation and, thereby new criteria for tax deduction eligibility on health insurance plans, effective from April 01, 2019.
Under Section 80D of the Income Tax Act, the new tax deduction limit on premiums paid for health insurance for parents, aged more than 60 years, has been raised to ₹ 50, 000 from the previous limit amounting to ₹ 30, 000. The amendment declared will be applicable during tax calculation for the assessment year 2019-2020 and thereafter.
The policyholders can seek tax exemptions up to ₹ 5000 on the amount spent on preventive health checkups, though this amount is within the set limit of ₹ 25,000 or ₹ 30,000 depending on the age of the policyholder and those covered under the health insurance plan.
To avail the benefits of tax exemption, the policyholder can consider paying ₹ 20,000 premium for himself while the rest ₹ 5000 would be expended towards costs incurred during preventive health checkups. Similarly, for senior citizen parents, the policyholder can pay a premium of ₹ 25,000 and spend ₹ 5000 on their preventive health checkups to avail tax exemption benefits.
Recommended Reading: Best Health Insurance Plans For Parents in India
Mode of Payment:
Some people prefer to pay premiums in cash. However, it must be remembered that to avail tax deduction benefits, the premiums for insurance policies including health insurance policies for self or parents, one must never pay a premium in cash. Policyholders must pay premium via Internet banking, cheque, drawing a demand draft or even by credit card to avail the tax benefits on premium payment.
Money saved is money earned. Investing in health insurance plans help to save against the sudden and heavy medical expenses that may arise in future. In addition, tax deductions on the premiums paid help save on money that would have been otherwise expended in payment of tax. This means that health insurance policies not only make you financially secure but also help save on the amount that you pay as premiums to ensure quality health condition.