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

Birla SunLife Manufacturing Equity Fund

The Make in India program was launched by Prime Minister Naredra Modi in September 2014 as part of a wider set of nation-building initiatives. It was devised to transform India into a global design and manufacturing hub. The primary motive of the campaign is to encourage multinational as well domestic companies to manufacture their products in India. This would create more job opportunities, bring high-quality standards and attract capital along with technological investment to bring more foreign direct investment (FDI) in the country.   Why India as the next manufacturing destination?   The rising demand in India along with the multinational's desire to diversify their production to include low-cost plants in countries other than China, can help India's manufacturing sector to grow and create millions of jobs. In the words of our Honourable Prime Minister- Mr. Narendra Modi, India offers the 3 'Ds' for business to thrive— democracy,...

Kisan Vikas Patra - KVP

  Kisan Vikas Patra (KVP) First launched in 1988, the Kisan Vikas Patra (KVP) is one of the premier and popular saving scheme offering from the Indian Postal Department. This product has had a very chequered history- initially successful, deemed a product that could be misused and thus terminated in 2011, followed by a triumphant return to prominence and popular consumption in 2014. The salient features of KVP are as follows- The grand USP- Money invested by the applicant doubles in 100 months (8 years, 4 months). KVPs are available in the following denominations- Rs.1000, Rs.5000, Rs.10,000 and Rs.50,000. The minimum purchase value for the KVP is Rs.1000. There is no maximum limit. KVPs are available at all departmental post offices across India. These certificates can be prematurely encashed after 2 ½ years from the point of issue. KVPs can be transferred from one individual to another and from one post office to another. ----------------------------------------------------- Inve...

Mutual Fund Review: Reliance Regular Savings Equity

    Despite high churn, Reliance Regular Savings Equity has managed to fetch good returns   In its short history, this one has made its mark. Though its annual and trailing returns are amazing, the fund started off on a lousy note (last two quarters of 2005). It managed to impress in 2006 and was turning out to be pretty average in 2007, till Omprakash Kuckian took over in November 2007 and wasted no time in changing the complexion of the portfolio. Exposure to Construction shot up to 28 per cent with almost 21 per cent cornered by Pratibha Industries and Madhucon Projects . Exposure to Engineering was yanked up (18.50%) while Financial Services lost its prime slot (dropped to 6.69%) and Auto was dumped. That quarter (December 2007), he delivered 54.66 per cent (category average: 25.70%).   When the market collapsed in 2008, thankfully the fund did not plummet abysmally. But even its high cash allocations could not cushion the fall which hovered around the category average. ...

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...

How to generate a UAN Online

Best SIP Funds Online   In order to make Employees' Provident Fund (EPF) accounts portable, the Employees' Provident Fund Organisation (EPFO) had launched the facility of Universal Account Number (UAN ) in 2014. Having a UAN is now mandatory if you have an EPF account and are contributing to it. So far, you got this number from your employer and every time you changed jobs, you had to furnish this number to the new employer.  However, in order to make it easier for you to get a UAN , and without your employer's intervention, the EPFO now allows you to go online and generate a UAN on your own. This facility can be used by freshers, or new employees, who are joining the workforce as well as by employees who have older EPF accounts but do not have a UAN as yet. As a new employee, you can simply generate a UAN and provide the number to your employer at the time of joining, when you need to fill up forms for your EPF contribution. As per a circula...
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