It is a well-known fact that the regular income of parents typically decreases after retirement. However, their expenses continue to rise, especially for medical care and daily living costs. While taking care of them is our moral responsibility and fulfills our emotional ecosystem, we can do so without creating any financial burden.
Moreover, the government has introduced various tax benefits for parents, especially in healthcare. Health insurance plans provide financial protection during a medical crisis as well as allow the policyholder to avail tax-saving benefits.
Health Insurance and Tax Benefits
Health insurance is a way to manage medical emergencies and planned treatments without financial burden. While it surely reduces financial stress, there are numerous tax benefits of health insurance that every family should be aware of.
Section 80D of the Income Tax Act, 1961, allows individual taxpayers to avail of deductions up to ₹25,000 (and up to ₹50,000 for senior citizens) for the premium paid by them toward a health insurance policy. Under this section, you can also avail an additional deduction of up to the same limit for your parents.
Section 80D Deductions for Parents
Here are different scenarios of how you can avail a maximum tax deduction under Section 80D for your parents:
Deductions for Parents below 60 years
A tax deduction of up to ₹25,000 is available for the health insurance premium paid for parents aged 60 years or below. If you have also paid the premium for self, spouse or dependent children, you can additionally claim a deduction of ₹25,000. Hence, the total deduction you can claim under this scenario is ₹50,000.
Deductions for Parents aged 60 or above
If your parents are senior citizens (60 years or above in age), the tax deduction available to them increases to ₹50,000. Hence, if you are below 60 years of age, you can avail a tax deduction of ₹75,000. If you are also a senior citizen, you can claim a deduction of up to ₹1 lakh under Section 80D.
Medical Expenses for Uninsured Senior Citizens
You can also claim medical expenses up to ₹50,000 incurred on the healthcare of senior citizens if they are not covered under any health insurance plan. This benefit is provided in lieu of the cost of health insurance premiums; therefore, it can be availed of only for senior citizens who do not have health insurance.
How Does Health Insurance Help Ensure Safety for Parents?
With numerous benefits that the government has introduced for taxpayers, ignoring health insurance because of the fear of premiums can weigh heavily later. Health insurance helps you to mitigate the rising cost of healthcare and stay prepared for the medical emergencies you may face in future. Hence, it is better to plan today so that you can reap the benefits tomorrow.
However, with so many medical plans being offered by different insurers, it is natural to feel confused as to which one is the most suitable. To select the best health plan for your parents, you must take into consideration all their medical history and current health status. If needed, you can also add optional covers (like a critical illness rider) or disease-specific health plans to enhance the coverage.
It is also important that you thoroughly read all the policy inclusions, exclusions and terms so that you exactly know what is covered and what is not covered under your plan. To compare different health insurance plans, you can visit the insurers’ website or explore IRDAI-authorised aggregators like Policybazaar.com. Comparing health insurance plans online lets you understand the features and benefits of different plans simultaneously at a single platform.
Common Mistakes to Avoid When Buying Health Insurance for Parents
Not Buying Health Insurance because of High Premium
The biggest mistake one can make is not to buy health insurance as senior citizens usually face higher premiums. In the long run, the price of a health insurance plan turns out to be a fraction of the actual medical expenses that may have to be incurred on their treatment or healthcare management.
Not Knowing About Tax Deduction Limits
Another major mistake to avoid is not being aware of the tax deductions. Many people do not know that the deductions on health insurance premiums are in addition to the Section 80C deductions. You must also be aware of the maximum limit that you can claim under a clause so that you do not claim for a lesser amount.
Overlooking Waiting Periods, Co-pay and Sub-limits
Another extremely important factor is not paying due attention to waiting periods for pre-existing diseases. Overlooking this can make it difficult to obtain a claim if a medical emergency or need for medical treatment arises due to the pre-existing condition. Not reading about co-pays and sub-limits can also create a financial burden later as you may not be able to get covered for the amount that you were expecting.
Buying Too Late
If you do not plan in advance for such medical situations, you may have to face quite a lot of financial burden in case of an emergency. It is better to buy a health insurance plan when your parents are healthier, as there are more options available and the premiums are lower. Financial planning helps you handle an emergency medical crisis without being shaken up too much. You will be able to focus more on recovery rather than arranging finances.
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