Types of health insurance covers
You cannot predict what is there waiting for you in the future. There are always lots of uncertainties coming up for you in the future and you are always unaware of it. These uncertainties cause a drastic financial crisis to your family and close ones. Getting health protection as early as possible is becoming extremely important. But do you know the various types of health insurance coverage and which one should you have?
Related Article: Complete Guide for buying Health Insurance Plans
Policy has become a fundamental requirement of every individual, thanks to the inactive life lifestyle most people tend to live today. This too is a reason why people are really worried about their health as a matter of fact. Therefore, they consider a lot of options when thinking of buying any insurance policy.
Insurance plans protect you during an unanticipated medical crisis and help in balancing your family’s finances during such a difficult time. Medical insurance has indeed become an obligatory thing to have today considering the rise in medical expenses and an increase in the number of diseases. A medical emergency can arise at any time and affects an individual and his family both financially and emotionally. Thus, financial advisors advise that it is prudent to buy health care policy and insurance plan in advance.
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With the evolution in human being’s mindset, they have started contemplating the radical aspects of their life and the health care necessities. And the best thing is that they have started acknowledging the fact that they indeed need health insurance whether its rationale or not.
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Insurance and its Tax Benefits
Saving taxes is everyone’s predominant motto when it comes to investments. Thankfully, the Income Tax Act 1961, has allowed various types of investment avenues to be exempt from the purview of income tax. If you choose these avenues for investment, you can earn tax exemptions and deductions on the amount you invest, the returns generated and the benefit you get.
When it comes to insurance too, you can earn income tax exemptions. Both in the case of life insurance and health insurance plans, tax exemptions are available. Let’s explore how –
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Life insurance and tax benefits
Premiums and tax benefits
The premiums paid for a life insurance policy are tax-free under Section 80C. The premium is deducted from your gross total income and, thus, lowers your taxable income. The maximum limit which you can claim as an exemption is Rs.1.5 lakhs. The premium can be paid for a policy taken by yourself, your spouse, and your children’s life.
Furthermore, the premium that you pay should not be more than 10% of the sum assured of the life insurance policy. So, if your policy is for Rs.5 lakhs, your premium should be Rs.50,000 or less to be eligible for tax exemption.
One thing which you should remember is that your premiums would be allowed as exemptions only if you hold your life insurance policy for a specified tenure. ULIP plans should be held for at least 5 years while other life insurance plans should be held for at least 3 years. If you do not hold the plans for these specified durations, the exemption allowed would be reversed back in the year you surrender the plans.
For premiums paid towards a pension plan, Section 80CCC would be applicable for claiming an exemption. The limit and other exemption conditions would be the same.
Policy proceeds and tax benefit
The maturity benefit or the death benefit which you receive is also tax-free in your hands. These benefits would not attract any tax under Section 10 (10D). Furthermore, there is no upper limit on the number of benefits that qualify for tax-exemption. Any amount you receive would be tax-free given the premium paid is below 10% of the sum assured. If the premium exceeds 10% of the sum assured, the entire maturity benefit would be taxable in your hands. The death benefit, however, would not be taxed even if the premium is above 10% of the sum assured.
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Annuity/pension plan proceeds and tax benefit
Under pension plans, whether traditional or ULIPs (Unit Linked Insurance Policy), the tax treatment of the policy proceeds is different. You have the facility of withdrawing 1/3rd of the proceeds in cash when the plan vests. This withdrawal is called commutation of pension and it is tax-free under Section 10(10A). However, the remaining 2/3rd portion of the policy proceeds, which are paid as annuities, are taxable in your hands. The annuity pay-outs you receive would be taxable at your income tax slab rate in the year in which you receive the pay-outs.
Health insurance and tax benefits
Health insurance plans also provide tax relief for the premiums that you pay. Health insurance premiums are exempted from tax under Section 80D. You can avail a maximum of Rs.1,00,000 as an exemption from health insurance premiums. Here’s how –
| If you buy a policy covering you and/or your family | You can claim a maximum exemption of Rs. 25,000 |
| If you are above 60 years of age and buy a policy covering you and/or your family | You can claim a maximum exemption of Rs. 50,000 |
| If you buy two policies – one covering you and/or your family and another covering your dependent parents | You can claim an exemption of Rs. 25,000 (for the policy on your family)+ Rs. 25,000 (for the policy on dependent parents) – Rs. 50,000 (total) |
| If you buy two policies – one covering you and/or your family and another covering your dependent parents and your dependent parents are above 60 years of age | You can claim an exemption of Rs. 25,000 (for the policy on your family)+ Rs. 50,000 (for the policy on dependent parents who are senior citizens) – Rs. 75,000 (total) |
| If you are above 60 years of age and your dependent parents are also above 60 years of age and you buy two policies – one covering you and/or your family and another covering your dependent parents | You can claim an exemption of Rs. 50,000 (as you are a senior citizen)+ Rs. 50,000 (for the policy on dependent parents who are senior citizens) – Rs. 1,00,000 (total) |
So, both life and health insurance plans provide you tax relief. While the premiums for both these plans reduce your taxable income, the policy proceeds of life insurance plans give you tax-free returns too. So, the next time you are investing in an insurance policy, know its tax implication.
Complete Guide for buying Health Insurance Plans
Health insurance policy has become a fundamental requirement of every individual, thanks to the inactive life lifestyle most people tend to live today. This too is a reason why people are really worried about their health as a matter of fact. Therefore, they consider a lot of options when thinking of buying any health insurance policy.
Health insurance plans protect you during an unanticipated medical crisis and help in balancing your family’s finances during such a difficult time. Medical insurance has indeed become an obligatory thing to have today considering the rise in medical expenses and an increase in the number of diseases. A medical emergency can arise at any time and affects an individual and his family both financially and emotionally. Thus, financial advisors advise that it is prudent to buy health care policy and insurance plan in advance.
With the evolution in human being’s mindset, they have started contemplating the radical aspects of their life and the health care necessities. And the best thing is that they have started acknowledging the fact that they indeed need health insurance whether its rationale or not.
Related Article: Types of Health Insurance policies amid COVID-19
That being said let us look at some reasons why you really need to buy a medical health insurance plan.
- Insufficient corporate health policy
The importance of health insurance plans cannot be overlooked as the medical costs are rising with passing days. In certain cases, your company’s insurance coverage won’t even be able to cover the expenses of a normal mild sickness i.e. two or three days of medical treatment in a hospital. Also, when you change your job or get retired, your company’s insurance policy will discontinue. So it is sensible to buy an individual medical plan.
- Rise in the prevalence of fatal diseases
Unfortunately, the whole world is fighting with life-threatening diseases. The alarming rate of increased heart diseases to swine flu to AIDS has created a state of chaos everywhere. As the medical costs are skyrocketing, with escalated demand for healthcare services and insufficient access to the topmost medical services (especially for the low-income group), medical health insurance is taking another course of action to fight lethal diseases.
- Improved Healthcare and financial planning
Medical emergencies and accidents can take place without any kind of prior warning and a good health insurance policy will certify that you are secured for medical emergencies. It is hard to guess how much you will splurge on health care around the year but if you have a medical insurance plan then it will definitely help you with sudden medical conditions expenditures. You can buy an individual as well as a family plan policy (covers the entire family). Normally, the family health plans are much cheaper than the individual’s one.
- Cost Benefits
Under Section 80D of the insurance act, you can get an exemption for your premium payment. The health insurance limit deduction has been increased from Rs15,000 to Rs25,000. The new limit for a senior citizen is Rs50, 000.
- Monetary Worth
Along with handling the hospitalization expenses, medical insurance companies also provide day-to-day hospital allowances for incurred spending on food expenses, going back and forth from home to hospital, and other regular hospital charges. Several insurance companies have started to include domiciliary treatment in their insurance coverage.
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- With this guide, you must have got a clear idea as to why it is so important to get yourself adequately insured. So without further delay, buy a health insurance plan for yourself and your family.
DO YOU STILL RELY ON HEALTH COVERAGE PROVIDED BY YOUR EMPLOYER?
Health planning is very important as you may never know what is beheld in the future and you are always unaware about the uncertainties and casualties in your life. This is why it is recommended to every individual to have a health insurance. Health insurance is beneficial for you at the time of any medical casualty and you need money for the treatment. The health insurance, for which you are paying the premium, provides you the coverage to support you financially in handling all the bills of the hospitals, treatment of the medical illness and the expenditure of the post treatment procedures.
Well there are various other health insurance plans that are offered to you when you are working in any company. These are group health insurance plans that are provided by the employer to you for any unfortunate events and hospitalization or any medical expenditure and treatments. This may seem like a great plan but do they really provide you enough coverage or are they reliable? These are some of the questions you should ponder over before taking the health insurances provided by your employer.
The employers are bound to provide the health insurance to their employees if they plan to resume functioning post lock down. Let us understand whether we should solely depend on medical covers provided by the employers.
The cancellation of the health insurance by the employer
There are various conditions and criteria on the basis of which the health insurance plans provided by the employer are subjected to cancellation. The employers have to provide a prior notification to his or her employees about the cancellation of the health insurance, but under some circumstances there are exceptions where the employees may or may not provide the notification about the cancellation of the health coverage.
The changes in the trend is seen hugely in the working group of people with respect to the health coverage provided by the employer
The working group of people in the present scenario are now not referring much to the health coverage provided by the employer as they are learning the other ways from which they can get health insurance with known coverage and with some additional benefits as well.
They have more options with them as compared to the working people few decades back. There are various options to join the health insurance coverage of their parents as a dependant when their parents’ health insurance is at the edge.
Here are few of the major reasons that will encourage you to drop the health coverage plans by the employer and move onto the other available options
- You do not have any control over the health coverage provided to you by your employer. The employer can provide the employees any random amount and it is all based upon his relationship with the employees. It may sometimes happen that the amount you are offered at the beginning of the job is sufficient for you at that particular age but when you grow; the health insurance may or may not be sufficient enough for your family of four. There can be conditions like when you change your job, and your new employer is providing you a little less coverage for the health than in your previous job, the coverage is reduced but the requirements of the individual and the family is still the same.
- Health coverage is provided until and unless you work under the same employer. Changes in the job will result in the cancellation of your health coverage and you can no longer access the health coverage plan from your former employer. Many of us are currently facing this problem after being laid off from the job owing to lockdown amid COVID-19. These people are not only without a job now but also without a health insurance plan. So solely depending on employer’s health insurance plan is not a good idea.
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- A fresh health insurance after retirement seems impossible. As long as you are serving the employer and fulfilling his needs, you will be insured with the health coverage. But at the point of time when you retire, the benefits of the health insurance plan exists no more. You may think of purchasing a new and fresh health insurance plan but without any regular income and some medical conditions, it seems to be an impossible task to get a new plan.
- The health insurance provided by the employer is not a necessity but an expense. The employer can cut short these group health insurances whenever he or she wants as the provision of these health insurances is not an obligation for the employer. It is just another expense for the employer to gain the tax credits and prevent him or her from paying any tax penalties.
- The extent of the coverage is not known by the employees. It is seen in most of the work places that the employees are unaware of the time period for which the health coverage is provided by their employer. You remain relaxed depending completely on the health insurance plan that you are offered by your employer without even knowing the nature of the health coverage and the extent of the coverage provided to you.
It is now made easier to port your group health insurance to personal health insurance under the scheme of IRDA and you will also gain the benefits of the waiting period as well. Do you still rely on health coverage provided by your employer? It is highly recommended that you get yourself adequately covered outside employer’s health insurance and treat the employer’s health insurance plan as just the add on benefit.
Why do you need to make health insurance part of your retirement planning?
The wealth earned by us is indeed determined by the quality of our health. The increasing medical costs makes it extremely difficult to sustain the corpus acquired by us throughout our life if we do not make adequate planning for health insurance. This is why financial planners focus on the importance of health insurance in retaining the viability of your long run financial goal. For benefitting out of the same, you will have to select the right health insurance plan which can last throughout your retirement life and hike up the value of your financial plan.
Importance Of Having Medical Insurance In Place
All of us yearn for a secure future both in terms of financial and health-related matters. A medical expense might seem manageable in your 30s with a regular income source for adding to your corpus. But the entire story changes once you enter the golden age of your life. With limited or even nil income sources, you need to bank on your earlier saved corpus to mitigate the rising medical costs. This is why it always pays to have health insurance in the first place.
Medical emergencies do not come with a prior warning. It also has a tendency of increasing with every passing day. Keeping such things in mind, it pays to have a health insurance policy in place. You can ensure the same by ear marking a certain portion of your savings to pay the premium starting today itself. A sound health insurance policy can assist you in handling all unannounced health expenses in a smooth fashion without causing a dent in your regular finances.
Purchasing a health insurance plan and aligning the same with your financial goals can be of great assistance in shielding you from unannounced medical expenses that can arise during your golden years. With a limited income source, it becomes extremely difficult to cater to the same. This is where a health insurance policy comes in as a complete blessing by providing for treatment expenses and hospitalization charges. Some of the policies also offer comprehensive plans to cater to a more versatile set of requirements.
Let’s see health insurance benefits in detail:-
Health insurance plans also serve as an important tax saving tool. An assessee can claim deduction under section 80D on the premium paid by him for securing the health of his family and parents. This deduction can be claimed as follows:
- For Self & Family – Maximum deduction of 25000 INR per annum on health insurance for self and family. Maximum deduction of 50,000 INR per annum if you are a senior citizen.
- For Parents -Maximum deduction of 25,000 INR per annum on health insurance premium paid on behalf of parents. Maximum deduction of 50,000 INR per annum on premium payments incurred for senior citizen parents.
- A deduction of 5000 INR can be claimed per annum on health check-up related expenses. This is applicable to all the family members of the taxpayer including his/her spouse, children and parents. This deduction is part of 25000/50000 as the case may be.
It takes years of hard work to gather adequate corpus which can bring you in line with your ultimate retirement goal. However, a sudden medical emergency can squeeze out all your hard-earned funds at one go. Nothing matches up to the importance of human life and that is why we try our level best to provide ourselves and our loved ones with the best of medical treatment.
Having a medical insurance policy can guard your back in such a case by preparing you to face all sorts of emergencies without worrying about the financial setback caused by the same. However, this is possible only when you opt for a health insurance policy which has adequate cover size and tenure to render protection against all sorts of illnesses.
Real Life Examples
Let us take the example of a middle-aged man in his 30s who falls ill and has to spend 10 lakh INR on treating his illness. He does not hold a health insurance plan and finances his expenses partly from his savings and partly by taking a loan. Once he recovers from the illness, he needs to start paying back his bank debt. This will be followed by saving money to primarily meet the earlier gap in savings for fulfillment of his ultimate financial goals.
Had he taken a health insurance policy which could cover his entire medical costs, then he wouldn’t have had to face such a scenario in the first place. The premium for gaining coverage worth 10 lakh INR would have varied somewhere between 10000-15000 INR per annum approximately. He could have even got a family floater policy covering two adults and two children by shelling out a little more yearly. Spending this nominal amount could have buffered him in times of medical emergency without derailing him from his ultimate financial objective.
Read More :- 6 Retirement Planning Mistakes To Avoid
Conclusion:
Health insurance comprises the lion’s share of retirement planning and it is time individual investors understand the same. Increasing medical expenses and future uncertainty is making it mandatory to have a medical insurance plan in place for buffering you from further troubles.
It is also necessary to maintain good physical and mental health in order to attain your ultimate financial goals. This is why financial advisors advocate these medical insurance plans to individual investors from a very early age so that they can gain more coverage by shelling out a relatively smaller premium.
6 Retirement Planning Mistakes To Avoid
Disciplined financial planning serves as the prerequisite of leading a financially secured retirement life. However, this hardly gets followed in most of the cases. Although retirement planning sounds a bit scary and confusing to most people, this anxiety can be entirely removed by avoiding the most common retirement planning mistakes committed by people. Today we are going to take a look at the biggest retirement planning blunders so that you can be well-braced while deciding on your retirement plan.
- Starting Late
Instances are not rare when people start planning for their retirement after reaching their 40s. However, at such a stage they also have other things to take care of like children, elderly parents, paying for a home loan and even maintaining a certain standard of living. Staring early in the track of retirement planning can provide you with more time to ensure the proper growth of your investments which in turn leads to greater corpus accumulation.
A 35-year-old planning to accumulate a retirement corpus of 1.5 crore INR needs to opt for a monthly SIP of 8000 INR at 12% annual returns. Whereas a 25-year-old would just need to invest 2300 INR in monthly SIP for attaining the same corpus. Thus, you can very well understand that starting early is not just a choice, it’s an absolute must.
- Inadequate Health Coverage
Growing age is synonymous with increasing medical expenses making it vital to opt for an adequate health cover which can cater to the sudden requirements you might face during the golden years of your life. Failure in procuring an optimum health cover meant for your post retirement phase can cause you to lose a major chunk of the retirement corpus in treating unforeseen medical expenses.
In many cases, employers provide group health policies but they remain active only till the time of employment. This is why it becomes imperative to opt for an adequate health insurance plan early and keep on renewing the same with timely payment of premium. Insurance companies usually extend their coverage up to 65-70 years in many cases and advise thorough medical check-ups once you cross over the age barrier of 55. It becomes imperative to opt for health coverage prior to the same and keep on increasing it on a yearly basis for catering to all medical costs.
- Overlooking Inflation Metrics
We often make the mistake of calculating our retirement corpus based on our current income and price level. Our income keeps on increasing till the date of retirement to keep in sync with the growing cost of living. However, the amount retirement corpus remains fixed based on certain decisions we take during the early stages of our life.
Inflation has a tendency of decreasing the purchasing power of money over time and hence it is necessary to consider the same while getting the retirement planning done. You can consider the expected and current inflation rate at the time of calculating your retirement corpus. Various online retirement calculators are available to assist you with the same on a monthly basis so that your accumulated corpus can easily sustain the wrath of inflation.
- Buying More Policies Than Actual Requirement
Several people end up buying around 14 to 15 insurance policies to safeguard them during retirement. But in reality, being a policy collector will not make things easier in your golden age. As an alternative, you need to learn in detail about the concept of life insurance and get a term life cover. This cover can be enough for taking care of the financial expenses of your dependants unless someone else in the family starts earning.
- Sporadic Reviewing Of Retirement Plan
A retirement plan might not be of much help if it is not reviewed and implemented properly. It is definitely not a one time activity given the long time span of the goal. In reality, changing times require changes in the plan and hence sticking to one single plan can result in faltered output. All major life events be it marriage, childbirth, taking a home loan or sending children abroad for education significantly affects your savings pattern making it mandatory to alter the investment strategy.
- Inappropriate Asset Distribution
Asset allocation has an extremely important role in deciding on the type of investment which can serve you in post-retirement stage. Asset distribution usually concerns the allocation of funds amongst different investment tools like bonds, stocks, real estate etc. Your individual needs and financial standing can significantly affect your asset allocation. Various factors like changing lifestyle, decreasing income and risk taking ability also alter significantly with increasing age.
Younger people having high risk bearing capability are usually advised to opt for equity investments as they can provide higher returns and are perfect for the long-term horizon. Your asset allocation needs to be periodically revisited for ensuring that it is appropriately aligned with your end goals. Acting otherwise might leave you with insufficient corpus which might not be able to beat the rising inflation metrics.
Read More :- Impact of COVID-19 on your Retirement Planning
Conclusion
The spread of financial literacy amongst Indian people have made them conscious about the requirement of retirement planning from an early age. Maybe this is why it is not rare to come across job fresher’s belonging to the 20 something age category seeking the assistance of financial experts in planning the golden days of their life.
With more and more youngsters opting to work under the private sector, a proper retirement planning is slowly turning into the need of the hour. Job insecurity and lack of government pension can be sighted as the biggest causes of the same. But if you are aware of the mistakes lined out above, then you can definitely attain your retirement goals in due course and with minimal obstacles.Download Minty app App store & Play store and chat with experts and know the best retirement planning strategies.