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The point of getting insurance is that it is the highest form of assurance. Insurance is a binding agreement between the insurer and the insured that gives the insured access to the best form of care, depending on the policy purchased. The underlying need is to make sure you and your loved ones are always protected no matter how unfavourable the situation is.
Also Read – 5 Benefits of Health Insurance
Section 80D and 80C of income tax deductions
There are many financial benefits of buying an insurance policy. Besides the sizable coverage that insurers offer, the tax benefits are also abundant. Who doesn’t like to have an option to save more money? Sections of the Income Tax Act under which you can save money on insurance are section 80D and section 80C.
Section 80C includes an exhaustive list of investments that when done by you, you can claim tax deduction while filing for your taxes. Some of these are Employee Provident Fund, Public Provident Fund, Life Insurance, Infrastructure bonds, and so on. These schemes and investment opportunities have been listed and you can choose any one which has the maximum benefit for you.
Also Read – Buy Health insurance for you and your family to save tax
Section 80D of the Income Tax Act refers to tax benefits available to you on the health insurance premium that you may have paid over the financial year. Medical insurance is one of the most important types of insurance. It ensures you are covered in case of unforeseen injuries and/or hospitalization. The key benefit of a health insurance policy is cashless hospitalization, which ensures that there is no delay in getting you the best treatment.
Also Read – Tax benefit on Insurance Premium, Mediclaim & Medical Expenses
Insurance policies for you and your family
Choosing the correct insurance policy is extremely crucial and should be done after considering your requirements and all the factors. If you have dependents, then the policy should provide for their requirements as well. In such cases, it is advisable to go for a family insurance policy rather than an individual policy for everyone as it is cheaper and provides more benefits.
Life insurance policy for a better tomorrow
A life insurance policy is a contract that states that the family of the insured person will receive a certain amount after the insured has passed away. The family is taken care of when the insured passes away. This ensures that the family faces no shortage of money and can take their time to streamline their life.
Health insurance policy
Health insurance has various types and can be modified to fit the needs of people with identified pre-existing illnesses. The premiums paid can be used to claim tax deductions.
There are packages based on the age of the insured and benefits are available accordingly. Inclusion of OPD for the younger lot, while the families or young couple get the advantage of a maternity cover. The older generation gets benefits that are suited to senior citizens, that include coverage for alternate treatments like AYUSH, no room rent capping, and so on. Paying for health insurance for yourself and your family, with dependent senior citizen parents, makes you eligible for tax deductions up to a maximum of 1 lakh rupees.
Also Read – How to choose a better health insurance policy?
Term insurance policy for a better life
Term insurance is an agreement to give the family compensation after the demise of the insured. The difference between life insurance and term insurance is that in term insurance, you are eligible to collect the amount only in case of the death of the insured. The premiums paid for term insurance are lower but the insurer has no financial liability after the tenure is over irrespective of the date of death.
How can the limits of tax deductions be maximised using each insurance?
| Insurance Type | Section of Income Tax Act | Maximum saving on tax | Conditions to be met to be eligible for tax exemptions |
| Life Insurance | 80C | 1.5 Lakh rupees | 1. Premium should not be more than 10% of the sum assured.
2. If the premium is higher, the amount proportionately eligible will be considered. 3. In case of death, the sum assured is tax-free, but if the policy matures, it is taxable. |
| Health Insurance | 80D | 1 lakh rupees | 1. Maximum deduction can be 1 lakh rupees in case both you and your parents are senior citizens.
2. Premium should be paid in any mode other than cash. 3. Amount available for senior citizens’ deduction can also be spent on medical expenses. |
| Term Insurance | 80D/80C | 1.5 lakh rupees | 1. In case the policy is surrendered or terminated, before 2 years from the beginning of the policy, the policyholder won’t receive the tax benefits.
2. For policies issued before 31st March 2012, deductions will be applicable if the premium does not exceed 20% of the sum assured in the financial year. 3. Term Insurance is covered under section 80C, however, if the policyholder has chosen a health-related rider, with their term insurance, they can avail deductions under section 80D as well. |
Also Read – Health Insurance Plans- Medical Coverage & Tax Benefits
