It all started from the month of December 2019 that we started witnessing the spread of coronavirus. The contagious viral infection that still doesn’t have any cure as no vaccine is introduced yet has kept us under lockdown for over 100 days now.
Covid-19 positive cases have risen in these past few months but at the same time people are getting recovered too. So that’s something positive we can look forward to. We are living in a world of uncertainties which are increasing day by day.
Millions of people are infected all over the world. During this time, there has been a flood of questions related to medical insurance. I am glad that people are now talking about the need for medical insurance. During such times, it is even more crucial to seriously consider including medical insurance in your financial planning.
Based on my experience and interaction with so many people and their families, I have realised that the ones who are young and healthy do not opt for medical insurance. This is because they feel nothing is going to happen to them. And the ones who have medical conditions find it difficult to get a cost effective and adequate cover.
So the point I would want to make here is getting an adequate health insurance is a preventive measure to protect your finances in case something as unfortunate as corona or any accident happens. It is better you get it early in your life so that you can enjoy more features and better coverage.
Now coming to questions that you might have in your mind regarding the current covid-19 and health insurance plans.
Read here: 7 Reason Why You Should Buy Insurance
Let me answer some frequently asked questions. I have divided these questions in two segments i.e. one for someone who already has taken some health insurance policy and others who do not have any insurance at all till now.
FAQs from people who have medical insurance
Q1 – If I get diagnosed with covid-19, Will my treatment be covered by my insurance company?
Answer: Well, as per IRDA all the health insurance companies offering indemnity based covers are instructed to settle the claim for covid-19 patients on priority. Also, it is important to know that the main features of your health insurance policy remains the same be it covid-19 or any other disease.
Let me brief you about 2 important features of health insurance policies to get better clarity on whether it be covered or not.
- Hospitalisation of 24 hours – This is common ground on which all health insurance policies work. If you get admitted into the hospital for at least 24 hours then only the cost will be covered by your insurance company. Few day care treatment is also covered in most of the policies but it does not apply to coronavirus. So if you are not admitted to the hospital, then you will not get your cost reimbursed.
- Pre and post hospitalisation expenses – Once you get hospitalised, majority of the insurance companies will also cover your pre and post hospitalisation expenses up to 35 and 60 days respectively. This means if you had incurred cost on covid-19 test pre hospitalisation, then that cost will be covered. However, if you are someone who got yourself tested and the report said negative then you cannot claim that expense from your insurance company. In short, diagnostic expenses are not covered by insurance companies unless there is a positive case and it leads to hospitalisation of at least 24 hours.
Q2 – What about expenses incurred for quarantine?
Answer: Based on the above two features, quarantine that does not require hospitalisation and treatment will not be covered.
Q3 – Can insurance company ask for additional premium in my existing policy to cover COVID-19?
Answer: No. As all the current health insurance policies which are indemnity based are already covering the novel coronavirus. You need not pay extra to cover the same. However, if you wish to enhance the sum assured then you will have to pay more premium.
Q4 – One of my friends already had a medical insurance, but still the company rejected the claim. What could be the reason?
Answer: Like I said before, all the features of health insurance policy remains the same. Let us say, if a person would have purchased the health insurance policy just 10 days prior to testing positive for coronavirus then definitely insurance company will not settle the claim. As the general rule, be it corona or any other disease, you cannot file for a claim in first 30 days of the policy purchased.
Q5 – I have a critical illness cover that I purchased 2 years ago. Is COVID-19 covered under this plan?
Answer: No. Existing critical illness covers do not provide cover for Coronavirus.
FAQs from people who do not have any insurance
Q1 – Which policy to buy that covers COVID -19?
Answer: All the health insurance companies offering products which covers covid-19. So study the detailed inclusions and exclusions before buying a health plan for you and your family. Low premium should not be the criteria to select a health plan. Instead look out for maximum coverage and a claim settlement ratio of over 90%.
Q2 – I have heard about standalone health insurance policies. What are those?
Answer: IRDA has instructed all health insurance companies to come up with a standard Benefit Based Covid-19 health insurance product by July 10, 2020. This is mandatory for the companies to offer. The cover ranges from 50,000 to 2.5 lacs with a single premium for 105 days or 195 days or 285 days. As proposed, benefit equal to 100% of the Sum Insured shall be payable on positive diagnosis resulting in hospitalization.
I hope all your questions are answered related to health insurance plans amid COVID-19. I highly recommend to invest in a good health insurance plan providing adequate cover. For the ones, who already have health insurance should check whether the cover is adequate. If not, it is suggested that buy additional cover.
Maintain social distance, wash hands regularly and stay insured!
Health problems coupled with their associated treatment expenses have been undergoing a rise in recent years especially due to poor lifestyle choices and changing food habits. We have seen that Indians self-finance 78% of their medical expenses out of which 72% comprise expenses related to purchasing medicines both before and after the procedures. This was the main reason behind the introduction of several provisions in Income Tax Act 1961 for providing requisite relief to the society.
Today we are going to take a detailed look at the tax benefits which can be claimed by an individual out of his medical expenses in AY 2020-21.
Section 80D Tax Deduction
First and the most common section is 80D. If you have taken a health insurance policy for yourself or your family or both then you can claim deduction of the premium paid under this section.
You can claim this deduction for medical insurance for yourself, your spouse, dependent children and parents. This benefit is not available for brothers, sisters or grandparents.
Amount allowed for deduction for self, spouse and dependent children is maximum Rs.25000. Another 25000 is allowed for medical premium paid for parents. This is provided you are paying a yearly premium regularly without fail. If the assessee or the parents falls under the senior citizen age category i.e above 60 years of age, then his exemption amount increases to Rs.50000. Thus, we can see that a person can avail a tax benefit in the range of Rs.25000 to Rs.100000 from this section.
It is important to know that expenditure on preventive health check-up can also be claimed in this section. The maximum deduction that can be claimed is Rs 5,000 irrespective of the person’s age. Remember, this is not over and above the individual limits as explained above.
There is good news for senior citizens above the age of 60 years. If they are not eligible to take health insurance, still deduction is allowed for Rs 50,000 towards medical expenditure.
Section 80DD Tax deduction
A HUF or resident individual can claim deduction on the medical treatment and rehabilitation expenses incurred on a handicapped dependent relative u/s 80DD of Income Tax Act 1961. The law defines a dependent person as a spouse, children, parents, brothers and the sisters of the individual.
A fixed deduction of Rs.75000 can be claimed when disability ranges between 40-80% whereas Rs.125000 can be claimed if the quantum of disability exceeds 80%. The amount of deduction is fixed here irrespective of the amount you actually spend. So even if you are spending 35000, you will still get a deduction of 75000 or 125000 as per the case.
Now you might have a question about who will define the percentage of disability in an individual.
Well, a certificate of disability from a prescribed medical authority is required for claiming deduction under this section.
Section 80U Tax Deduction
This section is similar to above i.e. 80DD. The only difference is that a taxpayer will get the benefit of this deduction if he himself is handicapped. For both sections, the amount that can be claimed as deduction does not depend on the age of the person. It depends on the percentage of disability of the person.
So the same 75000 or 125000 can be claimed as fixed deduction depending upon the extent of disability.
Section 80DDB Tax Deduction
Minor medical treatments, small surgeries and even medical consultations hold the ability of burning a deep hole in your wallet. In such a scenario, you can bring down your tax burden by availing the available deductions up to the maximum ceiling. A member of HUF or resident individual can claim deduction u/s 80DDB on medical expenses incurred on self, children, spouse, parents and dependent siblings.
However, this benefit can only be enjoyed by an assessee for the following specified ailments and diseases which are mentioned in Income tax Act:
- Malignant Cancer.
- Neurological diseases identified by a specialist with a disability level certified to be at least 40% or above such as Dystonia MusculorumDeformans, Dementia, Motor Neuron Disease, Hemiballismus,Chorea, Parkinson’s Disease, Aphasia and Ataxia.
- Chronic Renal failure.
- AIDS- Acquired Immuno-Deficiency Syndrome.
- Hematological disorders like Thalassaemia or Hemophilia.
It is imperative to note here that this section does not cover common medical expenses such as C-section or cataract. The age of the person on whom all medical treatment expenses has been incurred is considered before claiming the deduction u/s 80DDB.
The upper cap of deduction allowed in the provisions of Income Tax Act 1961 has been kept at 40,000 INR or the actual amount paid, whichever is less. It is for expenses incurred on self, dependent or a member of HUF. However, the exemption amount increases to 1,00,000 INR or actual expenses incurred, whichever is less if the medical expense is incurred on a senior citizen.
It is essential to understand that the amount of deduction claimed u/s 80DDB is exclusive of any other deduction which has been covered by other sections under Chapter VI-A. Any amount which has been reimbursed by the employer or received from the insurer on account of health insurance policy needs to be adjusted with the amount of deduction which can be claimed u/s 80DDB.
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These provisions in unison can be of great assistance in decreasing the tax burden while ushering in various exemptions and deductions related to payment of insurance premiums and other medical expenses. So make use of these expenses to lower your tax liability. For further personalised assistance, you can get in touch with our tax experts at Minty.