Critical Illness Insurance Plan With Section 80D Tax Benefit

Does a critical illness insurance plan have section 80D tax benefit?

23 Jan 2020
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Advancements in medical science have led to an astronomical rise in life expectancy. This has, however, not entirely eliminated or curbed the rise of critical diseases. It is said that one out of every four Indians is at the risk of dying due to non-communicable critical ailments like cancer, stroke, cardiac arrest, etc.

In 2017, India had 15 lakh cancer patients. It is estimated that by the end of 2020 this number will rise to 17.3 lakh. According to the World Health Organisation (WHO), every family will have one cancer patient by the end of 2020.

Moreover, 1.8 million Indians suffer from stroke each year. Similarly, 17 out of 100 people suffer from some kind of kidney ailment Moreover, the number of cardiac arrest patients has increased by 34% in India. The scenario gets even more gloomy with the sky-high medical bills, which financially disables many families.

The cost of treating the above diseases is in the range of Rs 3 lacs to Rs 15 lakhs and upwards. And the monthly expense for health management like medicines, dialysis, etc.is between Rs 5000 to Rs 40,000. The cost escalates further due to medical inflation, which rises by 10% to 15% each year. All this is taken care of if you have a health insurance policy with critical illness cover.

 

What is critical illness insurance?

When Alok was diagnosed with cancer, he only had a Mediclaim policy which took care of his hospitalization. The policy did not insure him against cancer and expensive treatments like chemotherapy which he had to undergo. He broke his fixed deposit to pay for the expensive treatment, which ended up costing him around Rs 10 lakhs. Moreover, he also had to quit his job due to weakness from chemotherapy and other treatments that followed.

In such a scenario, a health insurance policy with a critical illness cover would have been of great help to him and his family. A critical illness insurance gives you a lumpsum amount for medical treatment as well as rehabilitation. It offers you financial support while you recover from such life threatening diseases.

 

Tax Benefits under Section 80D

In addition to the numerous benefits a critical illness policy has to offer, it also comes with the additional perk of tax savings The premium paid towards this cover is eligible for tax benefits under section 80D of the Income Tax Act, 1961. A policyholder can enjoy tax savings of up to Rs 25,000, provided he or she is less than 60 years of age. Similarly, senior citizens above 60 years of age get tax savings up to Rs 50,000.

For instance, let us assume that you have taken out a critical illness insurance policy for yourself, wife and kids. All of you are below 60 years of age. In this case, you would get a tax deduction of up to Rs 25, 000 on the premiums paid. Say, your parents are also covered under a similar but separate policy. In such a scenario, you would be eligible to receive tax deduction of Rs. 50,000 on the premiums paid for them. Thus, your tax savings would be Rs 75,000 under section 80D of the Income Tax Act. Any tax deductions under Section 80D of the ITA are applicable over and above the deductions availed under Section 80C.

While Section 80D deductions can traditionally be availed on health insurance plans, you can now avail deductions on term insurance plans as well, if you opt for a health-related rider (for eg: critical illness, surgical care rider) along with it. For instance, the Bajaj Allianz term insurance plan available on Finserv MARKETS, comes with an add-on critical illness cover. With the Critical Illness Rider, you can avail comprehensive coverage for 19 minor and 36 major critical illnesses. Some of the ailments covered are cancer, heart ailments, Parkinson’s disease, etc. Thus, the plan takes care of financial hardships due to critical illness and is a source of relief to you and your family.

The policy can also be customized as per your needs. For instance, you can avail of a Child Education cover that takes care of the child’s educational expenses in case of the policyholder’s death. Bajaj Allianz Smart Protect Goal offers you cover up to Rs 1 crore with a low premium of Rs 13 per day. The life cover increases at every policy anniversary. The maximum sum assured can increase up to 200% of the base cover.

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