Maximising Tax Benefits Through Family Medical Insurance Policies

The increasing health expenditure in India is forcing families to find complete solutions for financial stability. However, the fast-moving medical insurance policy for family offers financial protection and tax-saving benefits, making it the smartest choice in this evergrowing, high-expense economy.

According to the Ministry of Health Affairs (MoHA), out-of-expenditure as a part of the total Health Insurance Expenditure has declined in the last five years. It has declined from 28.8% in 2017-2018 to 39.4% in 2021-22. Let’s understand the benefits of family medical insurance in detail and know how to choose the right plan.

The Benefits of Family Medical Insurance

Insurance protection for an entire family is an investment when you take a medical insurance policy for a family. One family has to have just one plan instead of each person needing a different plan, thus reducing the overall costs as well as administrative hassles. There are policies that cover dependent parents, which have many benefits while choosing the best health insurance for parents.

Suppose a family of five has opted for individual plans tailored to each member’s specific needs. The overall cost would take a toll on the total expenditure, increasing out-of-pocket expenses. Therefore, by opting for a family plan, the costs, as well as out-of-pocket expenditures, stay at a minimum using the tax deductions available through family medical insurance. All of this while the family is able to take care of each individual’s problem. 

Key Advantages

• The entire family is under one policy for hospitalisation, surgery, medication, and preventive care. 
• Instead of paying premiums for individual plans, a single-family plan could be cost-effective. 
• Under Section 80D of the Income Tax Act 1961, premiums for family health insurance are tax deductible.

Illustrative Example

The Sharmas are a well-to-do family residing in Hyderabad. They opted for a family medical insurance plan covering their two children, along with their elderly parents, as the medical expenses were on the rise. Within a year, they benefited from tax savings of ₹25,000, while their out-of-pocket hospitalisation expenditures were reduced by 85%. This helped them to channelise the funds towards other financial goals keeping intact their emphasis on health.

Tax Benefits Explained

The Indian Income Tax Act allows significant deductions on premiums paid towards health insurance:

• Self, Spouse, and Children: up to ₹25,000.
• Parents (Below 60 years): additional deduction of ₹25,000.
• Parents (Above 60 years): Deduction increases to ₹50,000.
• Preventive health checkups: Tax benefits of up to ₹5,000 within the overall limit.

Thus, families can reduce their taxable income and be medically insured.

Statistics Highlighting the Need

Even after a steep out-of-pocket expenditure decline, it is revealed that only 18% of the urban poor have access to health insurance. This leaves 82% of the rest of the population uncovered, hence highlighting the need for maximising tax benefits mentioned above through family medical insurance policies for a secured future. 

Tips for Choosing the Right Family Plan

• Assess Medical Emergencies: Study medical records of all members of the family. 
• Check Network Hospitals: This should include checking and confirming if the particular hospitals have network tie-ups. 
• Know Policy Exclusions: Know what is not covered. 
• Go For Add-Ons: Include critical illness or maternity coverage; that will make it more personalised to your needs.

Conclusion

Family medical insurance plans not only safeguard against soaring prices of health services but also considerably alleviate it in terms of tax. With options such as family health insurance and specialised plans such as the best health insurance for parents, you can cover your family and save on tax. Buying the right plan today will prepare you for emergencies and spare your future health and finances from such challenges.

Disclaimer: The stocks and companies discussed above aren't a recommendation from Finology Insider but a guest blog and shall not be construed as a replacement for professional advice. Consult a professional or conduct the necessary research before making investment decisions.