What is Section 80D?
It allows an individual tax benefits towards the premium he/she pays for a health insurance plan. This also includes the premium of a critical illness insurance plan or additional riders that come with medical insurance as a part of a life insurance policy.
How much tax can you save?
- If you are paying the premium for critical illness insurance plan or any other health insurance plan, you can claim deductions based on your age.
- Those below 60 years of age can avail tax deduction upto ₹25,000 annually for self, spouse and children. Those above 60 years of age are allowed a maximum of ₹50,000 towards the maintenance of health insurance policy or medical treatment.
- You are eligible to claim deduction on premiums paid for your parents. For parents below the age of 60, the threshold is ₹25,000. For parents above the age of 60, the threshold is ₹75,000. Therefore, if you are paying premiums for self/spouse/children and parents above the age of 60, you can claim a deduction of upto ₹75,000.
- If you are above the age of 60 and are also paying the premiums of parents (by default above the age of 60), then you are eligible for a maximum of ₹1 lakh as a deduction under Section 80D.
What is a critical illness insurance plan?
- It provides a lump sum amount to an individual to cover not only the cost of treatment but also recuperation from life-threatening illnesses that do not fall under a regular health insurance policy. The objective is to provide a financial cushion that goes beyond just the medical expenses. For instance, an individual suffering from a critical illness may not be able to secure a regular income. In such cases, a critical illness insurance plan provides a large lump-sum amount that can help cover both medical costs as well as the family’s daily expenses in this stressful period
- A range of illnesses such as heart valve surgery, heart attack, an organ transplant of kidney or liver, cancer, paralysis, stroke etc. are covered depending upon the insurer
- It is a fixed benefit plan that offers a fixed payout regardless of the treatment costs. A mediclaim policy only covers the actual expenses incurred
- It also helps pay off a debt taken to finance medical costs
Key points to keep in mind
- Usually, a 90 day waiting period applies from the time the critical illness policy is bought for it to be effective. Diagnosis of a critical illness within this period or death within 30 days of buying the policy is not covered
- Some plans might also require a person diagnosed with critical illness to survive for 28 or 30 consecutive days prior to making a claim.