Skip to main content

Optimise your Medical Cover





Choose medical insurance according to your needs, not to avail tax benefits.

Indians are known to leave things for the last minute, and tax planning is no exception. As the end of the tax saving season nears, there is a mad rush to buy whatever instrument offers tax deduction. Medical insurance is one such product. The premium paid for health insurance, up to `25,000, is allowed as special deduction under Section 80D (`30,000 for senior citizen), and can help save a significant amount of tax. For instance, a senior citizen in the 30% tax bracket, who spends `30,000 on medical cover, can save `9,027 in taxes (see table).

However, you need to consider whether you are buying health insurance for the cover you need, or only for tax savings. If it's the latter, it might not be a good idea. This is because heath insurance premium is a `spending' and should not be treated as an investment.


The first question to answer in this regard is whether you need medical cover at all. Experts believe that basic medical cover is necessary even for people who have a substantial contingency fund stashed away. When medical insurance is available at reasonable cost, there is no need for you to dent your contingency fund for this. You can save, but one trip to the hospital can wipe out the savings you have accumulated over 10 years.


As mentioned earlier, it is important to keep in mind that health insurance is not an `investment' that will come back to you later, and therefore, any insurance beyond your need is a waste. The second question, therefore, is how much cover do you need? This varies depending on the age (you will need less cover when you're younger and more as you age), as well as on family medical history (take bigger cover if your parents are prone to certain hereditary conditions like diabetes and hypertension).


The third question to ask yourself is what kind of cover do you need? Since Section 80D benefits are also available for smarter products like critical illness covers, top up plans, etc., there is no need to buy medical cover for taking advantage of Section 80D benefits alone. This question is critical because most of us may have some kind of cover. For example, the government provides healthcare facilities to its employees. Most people working in the organised sector also have some group insurance cover. Is that enough, or should you buy a personal health cover as well? The general consensus among experts is that it is better to have an additional personal cover. One issue with the company cover is that you lose cover as soon as you quit the job. I was between jobs when I needed the health insurance. Another problem of relying only on company cover is that it becomes difficult to get health insurance cover after retirement.


The base cover itself comes in two forms-one with sub limits (for instance, that maximum room rent cannot exceed `3,000 per day), or one without. Ideally, one should go for insurance without any sub-limits. Using a top-up plan is a smart way to reduce cost without compromising your insurance cover. Compared to a base cover of `10 lakh, a combination of base cover and top up will be cheaper. Instead of taking a base cover of `10 lakh that costs around `7,500, you can go for a base cover of `2 lakh, which costs around `2,700, and a top-up of `8 lakh, for an additional cost of `3,800, so the total cost will come only around `5,500.


However, people who choose the top-up option need to be careful about the type of top-ups they buy. "Instead of catastrophic top-ups, like one where each claim needs to be above the base cover, people should opt for aggregate top-ups. These allow the claims to kick in once the aggregate amount goes beyond the base cover limit



Critical illness cover is another smart way of getting your money's worth. The main sales pitch for health covers is that they will cushion the blow if you are suddenly diagnosed with a major illness. So it makes sense to buy a cover for just that. One advantage of a critical illness cover is that you get the money when you are diagnosed with the disease, and not based on the hospitalisation and treatment,


This raises another question: do you need a base plan or a critical illness cover enough?


Base plans and critical illness covers serve two different purposes, so you need both. The work in a complementary fashion. In the event of a sudden critical illness in the family, you may be forced to take leaves for an extended period of time, say for six months at a stretch, for treatment or recovery. Critical illness cover serves as a substitute for the income you lose in the process.


In addition to direct hospitalisation expenses, there will also be various other expenses involved in dealing with critical illness. Use the base cover for the hospitalisation expenses and the critical illness cover to supplement income, and other expenses not covered under basic cover.


There are also different varieties of critical illness covers available. So, should you choose a broader plan, or one that is specific to a few diseases? This question is especially relevant because some companies are launching disease-specific plans that cover only major illnesses like cancer and heart disease. Most major diseases are covered under critical illness plans, so there's no need to opt for disease-specific plans










Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds

Top 10 Tax Saver Mutual Funds for 2017 - 2018

Best 10 ELSS Mutual Funds to invest in India for 2017

1. DSP BlackRock Tax Saver Fund

2. Invesco India Tax Plan

3. Tata India Tax Savings Fund

4. ICICI Prudential Long Term Equity Fund

5. Birla Sun Life Tax Relief 96

6. Franklin India TaxShield 

7. Reliance Tax Saver (ELSS) Fund

8. BNP Paribas Long Term Equity Fund

9. Axis Tax Saver Fund

10. Birla Sun Life Tax Plan



Invest in Best Performing 2017 Tax Saver Mutual Funds Online

Invest Best Tax Saver Mutual Funds Online

Download Top Tax Saver Mutual Funds Application Forms


For further information contact SaveTaxGetRich on 94 8300 8300

------------------------------------

Leave your comment with mail ID and we will answer them

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

OR

Call us on 94 8300 8300



 

Popular posts from this blog

Tata Mutual Fund

Being a part of the Tata group, the fund has the backing of a very trusted brand name with strong retail connect. While the current CEO has done an excellent job in leveraging the Tata brand name to AMC's advantage, it is ironic that this was just not capitalised on at the start. Incorporated in 1995, Tata Mutual Fund remained an 'also-ran' fund house for around eight years. Till March 2003, it had a little over Rs 1,000 crore in assets and 19 AMCs were ahead of it. But soon after that the equation changed. It was the fastest growing fund house in 2004 and 2005. During these two years, it aggressively launched six equity funds, two debt funds and one MIP. The fund house as of now stands at No. 8 in terms of asset size. This fund house has a lot to offer by way of choice. And, it also has a number of well performing schemes. Tata Pure Equity, Tata Equity PE and Tata Infrastructure are all good funds. It also has quite a few good debt funds. The funds of Tata AMC are known to...

UTI Mutual Fund

Even though only a few of UTI’s funds are great performers, this public sector fund house has many advantages that its rivals do not. It has a huge base of retail equity investors and a vast distribution network. As a business, it looks stronger than ever, especially in the aftermath of credit crunch. UTI is, by a large margin, the most profitable fund company in the country. This is not surprising, since managing equity funds is more profitable than debt. Its conservative approach and stable parentage is likely to make it look more attractive to investors in times to come. UTI’s big problem is the dragging performance that many of its equity funds suffer from. In recent times, the management has made a concerted effort to improve performance. However, these moves have coincided with a disastrous phase in the stock markets and that has made it impossible to judge whether the overhaul will eventually be a success. UTI’s top performers are a few index funds, some hybrid funds and its inf...

Salary planning Article

1. The salary (basic + DA) should be low. The rest should come by way of such allowances on which the employer pays FBT and you don't pay any tax thereon. 2. Interest paid on housing loan is deductible u/s 24 up to Rs 1.5 lakh (Rs 150,000) on self-occupied property and without any limit on a commercial or rented house. 3. The repayment of housing loan from specified sources is also deductible irrespective of whether the house is self-occupied or given on rent within the overall ceiling of Rs 1 lakh of Sec. 80C. 4. Where the accommodation provided to the employee is taken on lease by the employer, the perk value is the actual amount of lease rental or 20 per cent of the salary, whichever is lower. Understandably, if the house belongs to a family member who is at a low or nil tax zone the family benefits. Yes, the maximum benefit accrues when the rent is over 20 per cent of the salary. 5. A chauffeur driven motor car provided by the employer has no perk value. True, the company would...

8 Investing Strategy

The stock market ‘meltdown’ witnessed since the start of 2005 (notwithstanding the recent marginal recovery) has once again brought to the forefront an inherent weakness existent in our markets. This is the fact that FIIs, indisputably and almost entirely, dominate the Indian stock market sentiments and consequently the market movements. In this article, we make an attempt to list down a few points that would aid an investor in mitigating the risks and curtailing the losses during times of volatility as large investors (read FIIs) enter and exit stocks. Read on Manage greed/fear: This is an important point, which every investor must keep in mind owing to its great influencing ability in equity investment decisions. This point simply means that in a bull run - control the greed factor, which could entice you, the investor, to compromise with your investment principles. By this we mean that while an investor could get lured into investing in penny and small-cap stocks owing to their eye-...

Debt Funds - Check The Expiry Date

This time we give you an insight into something that most debt fund investors would be unaware of, the Average Portfolio Maturity. As we all know, debt funds invest in bonds and securities. These instruments mature over a certain period of time, which is called maturity. The maturity is the length of time till the principal amount is returned to the security-holder or bond-holder. A debt fund invests in a number of such instruments and each of these instruments would be having different maturity times. Hence, the fund calculates a weighted average maturity, which would give a fair idea of the fund's maturity period. For example, if a fund owns three bonds of 2-year (Rs 30,000), 3-year (Rs 10,000) and 5-year (Rs 20,000) maturities, its weighted average maturity would be 3.17 years. What is the big deal about average maturity then, you may ask. Well, knowing a fund's average maturity is important because it tells you how sensitive a fund is to the change in interest rates. It is ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now