March 11, 2007

Health insurance set to become more affordable

There are no major surprises for the insurance industry in this year’s Budget. The only exception being that health insurance is set to become more affordable with increased tax breaks. It will also become more accessible to senior citizens, with new products being structured for them.

For instance, as against the present tax exemption limit of Rs 10,000 (under Section 80D of the Income Tax Act set 20 years ago), health insurance premium up to Rs 15,000 will now be eligible for exemption.

This means that you can ensure higher medical cover for yourself and your family while simultaneously saving more tax. According to experts, the move is bound to be welcomed by middle-class taxpayers who are unwilling to put up with pathetic facilities in most government hospitals and are intimidated by the heavy bills that accompany treatment in good private hospitals.

Depending on age, a payment of Rs 15,000 can earn a medical cover of up to Rs 5 lakh each for a family of husband, wife and two children.

For senior citizens, the exemption limit is even higher at Rs 20,000 — a much-needed move given the almost total absence of an effective social security system. At the same time, the hike in investment limit will benefit insurance firms by triggering an increase in demand for mediclaim policies.

There’s an added benefit for consumers: policies had become costlier since public sector insurance majors found they were paying large amounts on claims compared with sales. Following the tax sops, policies may now get cheaper.

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