Maximising your tax benefits from multi-year health insurance plans

Are you looking for ways to maximise your tax benefits? One way to do so is by buying a multi-year health insurance plan. In this blog article, you’ll learn about the benefits of multi-year health insurance plans, how they affect your income tax return, and how to maximise your tax benefits with a multi-year health insurance plan.

What are multi-year health insurance plans?

A multi-year health insurance plan is a plan that covers medical expenses over two or more years.

These are typically more popular with employers who use this type of plan to provide health coverage to their employees. However, it can also be used by individuals who are self-employed or those who do not have access to group health insurance coverage.

Multi-year health insurance plans include coverage for doctor visits, hospitalisation, prescription drugs, preventive care, etc. In addition, these plans may also provide coverage for dental and vision care and mental health services. Benefits of a multi-year health insurance plan

There are many benefits to buying a multi-year health insurance plan. Some of them are –

• Cost-effective: With a multi-year health insurance plan, you can save money in the long run by avoiding the need to purchase separate health insurance policies for each year.
• Convenient: With a multi-year health insurance plan, you don’t have to worry about renewing your policy yearly. You can enjoy the coverage that you have already purchased.
• Flexibility: Multi-year health insurance plans offer more flexibility than traditional single-year policies. For example, you can change your coverage or add additional coverage without purchasing a new policy.
• Higher coverage: Because multi-year health insurance plans are often purchased in bulk, they offer more security in terms of coverage than single-year plans.
• Tax benefits: One of the most significant benefits of multi-year health insurance plans is that they can provide tax benefits.

How a multi-year health insurance plan affects your income tax return

Multi-year health plans can provide significant tax relief when you file your income tax return. For that first, you need to know the tax relief provisions that are available to you surrounding medical insurance plans.

• Under Section 80D of the Income Tax Act, the payable premium amount can be deducted from the total income, thereby lowering the overall burden of the income tax. This leads to overall savings in tax expenditures.
• For self-employed individuals, a portion of the payable premium, under Section 80D, up to Rs 25000 in a year, can be claimed as a deductible. You can buy multiple plans and get tax relief on the premium paid on them.
• In the case of a senior citizen, the above-mentioned tax deduction on health insurance premium increases to Rs 50,000.
• You can avail this tax relief for a health insurance plan bought for yourself, your spouse, children and dependent parents. If you buy separate healthcare plans for every member of your family, the cumulative premium amount get increase exorbitantly.
• With a multi-year health plan, you can pay the premium once, and claim a tax benefit on the same by dividing the cumulative premium amount for each year.

 Points to keep in mind while choosing a multi-year health insurance plan

When choosing a multi-year health insurance plan, there are several factors to consider-

• Consider the type of coverage you need. For example, if you need coverage for a specific medical condition, choose a plan that offers coverage for that condition.
• It would help if you also consider the cost of the plan as well. Multi-year health insurance plans can be expensive, so it’s essential to ensure you get the best value for your money.
• Be aware of the policy conditions and features like deductibles and co-payments associated with the plan and any other costs associated with the policy. Read the policy document thoroughly.
• Do good research about the financial health of the insurance provider. Check their claim settlement ratio. Ensure the provider is reputable and has a good track record of providing quality health care coverage.

 Tips for maximising your multi-year health insurance plan tax benefits

So, you are now aware of the benefits of multi-year health insurance plans, the related tax benefits, and things that you need to consider while buying one. To avail tax benefits from multi-year health insurance, you should keep in mind certain factors, some of which are mentioned below:

• Under Section 80D of the Income Tax Act, the premium for multiyear health plans is deductible from income. To receive the tax benefit, the premium must be equally split for each year.
• Be aware of the different limits of medical insurance premium deduction available corresponding to the different age limits.
• Try going for a cumulative premium amount (because the premium will be the same for all the years in a multi-year health insurance plan) which when broken down annually, remains under the limits of the deduction outlined under Section 80D of the Income Tax Act.
• The tax deduction available for preventive healthcare checkups up to an amount of Rs 5000 applies to multi-year health insurance plans as well. So, make sure if your annual premium amount is less than the stipulated deduction limit (Rs 25000/50,000 depending on the age) you take advantage of the residual limit for expenses incurred on preventive checkups.

So, multi-year health insurance plans can provide many benefits, which cost savings, stable premium amount, flexibility, and wide coverage, along with the benefit of tax deductions. When choosing a multi-year health insurance plan, consider the type of coverage, the cost, and the deductibles and co-payments associated. To avail the tax benefits of premiums paid on medicare plans, you should make some effort to understand the applicable tax provisions.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.