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What Tax Benefits Would You Receive With Critical Illness Insurance?

Due to our increasingly sedentary lifestyle, today even the younger generation has become vulnerable to different critical illnesses like heart attacks. Nearly 40% of heart patients in India belong to the age group of 25-35 years. India has witnessed a starking rise in the incidence of heart disease, stroke, diabetes and various forms of cancer in the past 25 years. According to a study by the United Nations, non-communicable diseases like cardiovascular, diabetes and cancer can cost the Indian economy $6.2 trillion during the 2012-2030 period. The UN report has rung a warning bell about the rampant spread of such diseases in rapidly urbanising countries like India and China. For India, the economic implications of cardiovascular diseases during this period stands at $2.25 trillion, the same as that of diabetes.

The cases of critical illnesses like cancer, lung disease, renal failures etc, are rising meteorically, not just in India but across the globe. Such critical illnesses are not just physically and psychologically taxing but also lead to a financial crisis in families, especially when the sufferer ends up being the sole breadwinner of the family.

According to another study, heart ailments caused more than 2.1 million deaths in India in 2015 at all ages, or more than a quarter of all deaths. Alarmingly, more than half of the total cardiovascular disease deaths in India in 2016 were in people younger than 70 years.

Given the rising risks to our health due to our deteriorating lifestyle patterns and degrading natural resources, it is a prudent decision to invest in a critical illness insurance plan apart from the standard health insurance policies.

A critical illness insurance cover is an essential investment before you start thinking of your long-term financial goals. A critical illness insurance plan helps to safeguard the financial future of you and your family against any such unforeseen circumstances relating to your health. In a critical illness insurance cover, you receive a lump sum payment that can be utilised in any way you want, whether to pay for your rising medical expenses or recovery and rehabilitation process. A critical illness insurance cover comes with a predetermined list of illnesses that are covered under the plan.

Moreover, a critical illness insurance plan also helps you save on taxes as the premium paid for health insurance also provides a tax benefit by reducing your taxable income.

The premium paid by you in your critical illness cover qualifies for deductions under Section 80D of the Income Tax Act. Moreover, this tax benefit is available for premiums paid for your children, parents or spouse as well and it is independent of whether they are financially dependent or not.

Now, it is important to remember here that the tax savings enjoyed by you will also be influenced by your age. The maximum deduction that can be availed is ₹ 25,000 a year for those not older than 60 years.

Moreover, if the premium towards a critical illness insurance plan taken for one’s parent who is a senior citizen and older than 60 years, the maximum deduction has been capped at ₹50,000. Therefore, you can maximise your tax benefits under Section 80D to the tune of ₹75,000 if your age is less than 60 while your parents’ age is above 60.

Some investments are made not just to maximise your benefits or save taxes but to safeguard you and your family against any such adverse circumstances that may put you in a financial bind. A critical illness cover is one such investment, but to the investor’s benefit, it also provides lucrative tax benefits. Considering the rising healthcare inflation in the country, the regular health insurance policy does not suffice to keep your family financially afloat during times of crisis. Therefore, investing in a critical insurance cover should be in the priority list of any prospective investor.

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