Mahesh was hospitalised for undergoing an emergency appendectomy. While the surgery was successful the bills which he incurred disrupted the budget of his household for the next five months!
This story, as sad as it might seem, is quite common.
Medical expenses have become prohibitive and even a simple case of hospitalisation is sure to blow a hole in your pockets. Moreover, medical inflation is constant; add to it the increased life expectancy and you get the formula for financial distress.
As life expectancy has increased, diseases and ailments have also become quite common. As such, medical emergencies have become a possible risk against which financial protection is needed if you want to safeguard your finances.
This is where a health insurance plan comes into the picture. Do you know what it is?
What is Health Insurance?
Simply stated,health insurance covers the medical costs incurred if you suffer from a medical contingency for which you are hospitalized. The policy comes to your aid in meeting the expensive medical costs which would, otherwise, blow a hole in your pockets.
What Health Insurance covers?
Some of the common coverage benefits which are found in health insurance plans include the following –
Types of Health Insurance Plans
Besides the wide scope of coverage available under health insurance policies, there are different types of plans which are available in the market. This gives you the benefit of choosing a plan depending on your coverage.
The different types of health insurance plans available are as follows –
Brief understanding of each type of health plan
- Indemnity oriented health insurance plans
Indemnity oriented health insurance plans are those plans which cover the actual costs incurred when you are hospitalised and you seek medical assistance. So, if you buy an indemnity plan of Rs.5 lakhs and your medical bills amount to Rs.2 lakhs, you would get a claim of Rs.2 lakhs.
- Fixed benefit health insurance plans
Fixed benefit health insurance policies are those which cover a specific medical contingency. If you suffer from the covered medical contingency, a lump sum benefit is paid irrespective of the medical costs which you actually incur. So, if you have a fixed benefit plan of Rs.5 lakhs which covers cancer and you suffer from cancer, the policy would pay Rs.5 lakhs as claim even if your medical bills amount to Rs.3 lakhs.
Both indemnity and fixed benefit health insurance plans are further subdivided into different types of policies. So, let’s understand the types of health plans under each category independently –
Health Insurance Taxation
Health insurance policies allow you a tax benefit on the premium that you pay to buy the plan. This benefit is allowed under the provisions of Section 80D of the Income Tax Act, 1961. The limit of deduction which is available is as follows –
| Individuals covered | Limit of deduction |
| You and/or your family when you are aged below 60 years | INR 25,000 |
| You and/or your family when you are a senior citizen | INR 50,000 |
| You and/or your family when you are aged below 60 years
+ An independent cover for your dependent parents who are not senior citizens |
INR 25,000
+ INR 25,000 |
| You and/or your family when you are aged below 60 years
+ An independent cover for your dependent parents who are senior citizens |
INR 25,000
+ INR 50,000 |
| You and/or your family when you are a senior citizen
+ An independent cover for your dependent parents who are also senior citizens |
INR 50,000
+ INR 50,000 |
Thus, you can claim a maximum deduction of up to INR 1 lakh on health insurance premiums and lower your tax liability.
Understand what a health insurance policy is and then choose the most suitable type of plan based on your coverage needs. A suitable health insurance policy would not only provide financial security in a medical emergency, it would also help you save taxes.