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Why Health Insurance is necessary in Financial Planning?

Health Insurance is perhaps the only insurance product that is severely misunderstood. While the level of uncertainty is increasing day by day, cost of healthcare has increased manifold.


However, is it related to financial planning in any way?

It’s correct that financial plans and objectives can be achieved by strong financial discipline, good amount of savings and sound investments. Now if you are not healthy or fit, then could you achieve your targets? The insurance decisions you make should be based on your family, age, and economic situation. There are many forms of insurance and, unfortunately, no one-size-fits-all policy. Therefore, health insurance should be one of your topmost priority and it should be availed at the beginning of your career to mitigate the risks in the long run.


What are the benefits of a health insurance?


    1. Post-Retirement Benefit

Health Insurance plans can be renewed throughout the life-time and this feature of lifelong renewability is very crucial post-retirement when you are no longer covered by the corporate insurance provided by the employer. After retirement, your income gets reduced although the probability of medical contingencies is high. Pay premium regularly and on time and before buying also look at clauses like critical illness cover, Co-Pay, OPD payment etc.


     2. Start early: Benefits of buying health insurance young

While one is young and free from medical complications, the premium is lower and the policy offers comprehensive coverage in comparison to a policy purchased at an older age. Most health insurance companies have an upper age limit. Health policies bought at an older age tend to exclude pre-existing diseases and then you need to pay for their treatment. One can enjoy the benefits of cumulative bonus in the form of no claim benefit if they renew the policy without any claims.


     3. Medical costs depletes your savings very fast

We all know that medical costs are increasing exponentially yearly. Medical inflation is forever on the rise. Do you think you can handle it without a cover? On top of that, the cost of hospitalisation and surgical procedures is getting out of reach for most of us. Your hard earned money can disappear overnight, thanks to the exorbitant pricing. What is the point in creating all those investments if you do not have a health plan to protect them from being depleted? A health plan is the best saviour when it comes to a medical emergency.


     4. Save tax on Health Insurance under Section 80(D)

Don’t you invest to save your taxes as well? Well then, health insurance takes care of your health and even save taxes. As per Section 80(D), one can claim deductions for the premiums contributed towards a health insurance plan by an individual or HUF from the total taxable income. This deduction is over and above the limit of Rs. 1,50,000 under Section 80(C). For the Financial Year 2017-18, under Section 80(D), one can claim a deduction of Rs 25,000 per annum for a premium paid for a health insurance plan covering self, spouse and children and additional deduction of Rs 25,000 per annum for premiums paid to cover their parents. For individual above the age of 60, this limit is Rs. 30,000. 

To conclude, health insurance plans provide excellent opportunity to reduce one's tax-liability and you must make the most of it but the primary reason to invest in such plans should be to give yourself sufficient financial cushion for any kind of medical emergency to you or your family members.

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