The need for health insurance is great yet, most families and individuals are unaware of its benefits and its importance. One unexpected visit to a hospital can diminish the reserve or investments accumulated over a long period. In case of critical illnesses, it will be no surprise if the entire investment is eroded towards the hospital bills, treatment and medicines. The importance of having adequate health insurance can be summarized thus.

• Health insurance pays for future illnesses/medical treatments without depleting your savings or negatively impacting your family’s financial future.
• Medical costs are increasing rapidly and for those with insufficient savings, affording medical care becomes a problem during emergencies.
• Cashless treatment possible with network hospitals while reimbursements are given by insurance companies in other cases.
• Health insurance plans offer coverage for several types of ailments and surgeries along with other aspects of medical treatment.
• Health insurance keeps you and your family worry-free. You only have to pay a small premium for it.
• In many cases, you also get coverage for hospitalization costs, ambulance costs, consultations, medicines, tests and post-hospitalization expenditure.

1. Indemnity Plans – These plans are also known as traditional health insurance plans. These plans take care of your hospital expenses either through a cashless facility or reimbursement up to the total sum assured. Indemnity plans are available in two variants viz. individual policy and floater policy. Below are different kinds policies one can choose based on their requirement.
   • Base plan – Base plan is also known as regular health insurance plan. These plans cover hospitalization without any limitation in the claim up to the sum assured as per the insurance contract, on indemnity basis. There would be some limitation in coverage based on the product features.
   • Top up plan – Top-up plans are basically add-on plans, which cover hospitalization costs outside the specified limit. One can purchase a top-up plan in addition to one’s regular or base health insurance policy. Top-up plans cost less and provide higher coverage. These plans covers single claim above the threshold limit.
   • Super top-up plan –Super top-up plans is similar to top-up plans and covers the total of all hospitalization bills above the specified limit. It means specified limit is applied to all the claims in one year.
   • Special plans –These are the plans specially designed to meet the needs of senior citizens who are above 60 years of age. These are also called as Senior Citizen plans.
2. Benefit Plans – These plans are also known as fixed benefit plans. These plans provide fixed and guaranteed amounts equivalent to the sum assured in case of an occurrence of an insured event as per the policy terms mutually accepted by the insurer and the insured. Once the total sum assured is paid to the insured, the policy gets terminated. These plans are mostly available on individual basis only. Below are different kinds of policies available as per one’s requirement.
   • Critical Illness plan – Critical Illness plans provide coverage against permanent or specific life-threatening illness. In case of critical Illness plans, insurers pay a lump sum amount, equal to the sum assured regardless of hospital expenses on acquiring a life threatening illness. This plan is also known as critical illness cover or dreaded disease policy.
   • Hospital Cash Benefit plan – Hospital cash benefit policy provides a fixed amount in case of hospitalization. The cash benefit amount is pre-determined at the time of purchase of policy and is fixed. This amount can be used as per the insured’s need either for meeting additional expenses that are not covered by regular health insurance plan or as a compensation for the income loss during the period of hospitalization.
   • Personal Accident insurance plan – Personal accident insurance policy can reimburse one’s medical cost and also provide compensation in case of disability or death caused by accidents. In case of death, the policy pays the total sum assured to the nominee. In case of disability, be it permanent or temporary, a specified percentage of sum assured is paid as per the insurance contract.

The most common advantages of health insurance are –

• Cashless benefit
• Wealth protection
• Covers medical inflation
• Quality treatment
• Additional Protection over employer benefit
• Alternative treatment benefits

There are no limitations to the concept of insurance. However, products created by insurers may have certain limitations through the policy terms, just as how we mentioned in the case of life and general insurances. Health insurance is very important, unarguably. It is only that some people who are well-off may not find a need to buy insurance, as they can afford the expenses out of their reserves or cash flows. But that is not the case with most families and individuals.

The limitation in case of health insurance can be in the form of maximum limit on insurance cover one can buy in spite of affordability. Second, depending on the features of the policy or the extent of the coverage of expenses, the premium may vary from company to company vastly and generally expensive with a majority of insurers. Other limitations of health insurance products include compulsory inclusion of unwanted features and exclusion of certain medical conditions when there is a claim, thereby increasing the financial burden on the policy holder, to some extent.

Nevertheless, one must understand that regardless of one’s financial position, health insurance is a great way to minimize the impact of expenses in case of hospitalization due to an illness and save a lot of money that can otherwise be invested for various other goals to secure one’s financial future.

The premium paid by the employer is a before-tax business expense. Personal health insurance plans marketed and sold by private or national insurance companies are taxable. They are taxable because premiums are paid by individuals out of their after-tax income.

Premium paid on health insurance is tax-deductible under section 80D of the Income Tax Act, 1961. Under this section, a tax deduction is provided towards the health policy for oneself, spouse, and children. One can also include one’s parents in the policy to spread the insurance benefits and avail tax benefits.

Below are the limits for Sec 80(D) for the F.Y. 2020-21

1. Age of family member below 60 years – Rs. 25000/-
2. Age of family member above 60 years – Rs. 50000/-
3. Age of parents below 60 years – Rs. 25000/-
4. Age of parents above 60 years – Rs. 50000/-