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How useful are the new medical insurance limits?

Family floaters, OPDs covers can help exhaust the limits

Ashley Coutinho  |  Mumbai 

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Tax payers will now be able to claim higher deductions on health policies. The Union Budget 2015 has increased the deduction for medical health premium to Rs 25,000 for individuals and Rs 30,000 for senior citizens.

Earlier, the health premium limit under Sec 80D was Rs15, 000 for individuals. For senior citizens this limit was Rs 20,000.

An individual can claim deduction towards the health insurance premium paid to himself, spouse, dependent parents or dependent children of the assessee. So, for the entire family including parents, an individual can claim a deduction of up to Rs 55,000 as opposed to Rs 35,000 earlier under section 80D.

Read our full coverage on Union Budget

But will it really benefit the middle class? And can individuals really exhaust this higher limit? According to experts, the higher limit will particularly be useful for senior citizens who may have to shell out a higher premium on their health insurance. For example, a 60-year-old may have to pay Rs 20,000 to Rs 25,000 to buy a simple Rs 10 lakh health cover. This cost escalates as one ages. The premium for special covers can be as high as Rs 50,000.

ALSO READ: Higher tax exemption for health insurance premium

“The hike in limit will be useful considering that the cost of medical insurance will rise in the coming months. Medical costs are rising 30-40 per cent every month as well,” said Yashish Dahiya, CEO, Policybazaar.

The new limit may not be too useful for those below the age of 35 years. For instance, a regular Rs 10 lakh indemnity plan will cost around Rs 7,000 for a 30-year old. To exhaust the limit, one would have to buy top-up covers for critical illnesses and hospital cash benefit.

According to Dahiya, one can opt for policies that offer cover for out-patient department (OPD) or day-care procedures to better utilise the Rs 25,000 limit. Premiums for such covers are almost thrice that of a regular health insurance cover. Those opting for family floaters of Rs 10 lakh and above will also have to pay a premium that is close to Rs 25,000.

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First Published: Tue, March 03 2015. 12:22 IST