Understanding Tax Deductibles in Critical Illness Insurance Premiums
Critical illness health insurance plans may not be at the top of many people’s minds when it comes to insurance coverage. Still, they can play a crucial role in protecting one’s financial well-being in the face of a serious illness. These plans have gained popularity in recent years as they offer a sense of security for individuals and families. This article will delve into the nitty-gritty of critical illness insurance plans, specifically examining the tax deductibles available.
What is Critical Illness Insurance?
Critical illness insurance plans are a type of insurance coverage that provides a lump-sum payment to the policyholder if they are diagnosed with a specified severe illness. These illnesses typically include cancer, heart attack, stroke, and other life-threatening conditions. The payment can be used to cover medical expenses, lost income, or any other expenses the policyholder may incur as a result of the disease. Standalone critical insurance policies offer more holistic protection than health insurance with critical illness cover.
What are the Advantages of Critical Illness Policy?
Critical illness insurance can be a valuable addition to other types of insurance, such as health insurance and disability insurance, to provide additional financial protection. The benefits offered are listed below.
Offset Lost Income
Being diagnosed with an acute disease hampers your ability to work and earn money. This endangers your and your family’s well-being, especially if you are the sole breadwinner. You can use critical insurance claims to meet your treatment and living expenses at such times and avoid the erosion of your savings.
Enhance the Health Insurance Support
A critical illness insurance plan is a separate coverage; the claim will not diminish the amount available under your health insurance policy. Instead, it will ensure you have an adequate sum insured to receive expensive treatment.
A Wide Range of Illnesses Covered
Critical illness coverage covers many severe illnesses. You should review the policy to determine how many and what kinds of illnesses are covered because the critical illness list varies according to the insurer and the policy.
Are Tax Benefits Available for Critical Illness Insurance?
Yes, under Section 80D of Income Tax Act, the premium paid for critical illness health insurance is eligible for a tax deduction. This is in addition to the ₹1,50,000 available under Section 80C. The process for availing of the exemption has been made simple by the income tax authorities. No documentation or proof is mandated.
However, it is advised to maintain some basic documents. This will help you while filing your tax return. Your employer can also ask for proof while issuing Form 16 of the Income Tax Act. Therefore, you should ideally try to maintain a record of health insurance premium receipts, hospital bills, medical expense receipts, etc.
The treatment of critical illness insurance premium wrt tax is explained in the following table.
|Self below 60 yearsParents below 60 years||Self below 60 yearsParents above 60 years||Self above 60 yearsParents above 60 years|
|Deduction for self, spouse & dependent children||₹25,000||₹25,000||₹50,000|
|Deduction for parents||₹25,000||₹50,000||₹50,000|
Further, to avoid any complications in your tax calculation, you should be mindful of the following.
- Premiums should not be paid in cash. Modes like cheques and electronic payments should be used.
- Relatives like brothers, sisters, grandparents, uncles, aunts, and working children, are not covered.
- Group health insurance premium paid on behalf of employees is not eligible for tax benefit.
- GST and cess charges levied on premiums paid can not be claimed.
Critical illness health insurance plans help policyholders maintain peace of mind in the face of medical calamities. The tax deduction is an added advantage and ends up reducing the policy’s overall cost. To get your hands on the best policy, you must compare the rates offered by different insurers and select the most economical one. For this purpose, you can use the critical illness insurance premium calculator listed on insurers’ official websites.