Health Insurance Could Prove to be a Financial Tool

Apr 22, 2019 | 2 months ago | Read Time: 4 minutes | By iKnowledge Team

Health insurance, by its very definition, helps us in providing a guaranteed compensation for specified damage, loss or death, when we pay a certain premium.


Health coverage is universally regarded as a mandatory component of investment allocation, and although not much attention or importance is given to it when you’re young and healthy, the need for availing health cover knocks on your door as soon as you tip on the wrong side of your twenties.

However, the insurance penetration in India (ratio of premium to GDP) in 2017 was a mere 3.49%[1], much lower than the world insurance average penetration of 6.2%.

Penetration of Insurance in India

Source: Statista[2]

As the benefits of insuring your health are lost on most of us, our chances at availing better health care also dwindle, especially as medical costs keep rising and we are left at the mercy of our savings. It does not bode well for our financial future to fund expensive treatments out of our own pockets. As a financial planning tool, medical cover would take a hefty load off your monthly budget.

Health insurance in India

Health insurance in India

Source: Statisa[3]

In a recent survey involving young Indians, young policyholders between the age group of 25 – 44 years said that they would opt for online health insurance, while about 30% of the people between the age group of 25 – 34 said that they had purchased health insurance online[4].

Source: Ask Arvi

The deduction on Section 80D in the Income Tax Act, 1961 allows the policyholders to claim a deduction up to Rs. 25,000 per budgetary year for medical insurance premium instalments[5].

Section 80D Source: FinCash[6]

Moreover, few months ago, the IRDA announced that they were close to making a decision about a plan, that could save money for the policyholders. The new plan would allot an account to the policyholder, where they can save money for future purposes. In this new savings – cum – health insurance product, the premium will be divided into three components, and while the first two will be used for risk charges and expenses respectively, the third will be the savings component[7].

persons covered by health insurance in India

Source: Report Linker[8]

Health insurance plans

You can choose the health insurance policy that best fits your needs. Choosing a plan should happen alongside your assessment of your finances, health conditions, family size, future plans, income and pending debts. But despite the constraints, it is crucial to keep a portion of your monthly paycheck aside for the health insurance premium.

It also becomes a financial strategy to ensure adequate funds are available for other important financial goals or unforeseen situations. Thus, besides its power to alleviate threats posed to life, a health insurance policy can save you a lifetime of worries. Your health and your wealth stand to gain from having a comprehensive medical plan in place. By choosing to invest in a health plan, you are not only taking a decisive step in giving your life expectancy a bump, but also secures your future financially. Treating it as an added expense is perhaps not a great habit to inculcate.

The rate of medical inflation in India is 15%[9], and Aegon Life provides multiple health insurance options to choose from. With a policy like Aegon Life’s iCancer Insurance plan, you will not only be covered for different types of cancers, but also be able to claim tax benefits on the premiums, under section 80D of the Income Tax Act, 1961. Furthermore, you have the flexibility of making the premium payment annually or monthly, and can buy the plan online! With the tax benefits on the premiums, one can look at health insurance as an important financial planning tool, instead of seeing it as just a medical cover.

Citation:
[1] https://timesofindia.indiatimes.com/business/india-business/insurance-penetration-in-india-has-risen-to-3-49-economic-survey-says/articleshow/62696220.cms

[2]  https://www.statista.com/statistics/655395/life-and-non-life-insurance-penetration-india/
[3] https://www.statista.com/statistics/657244/number-of-people-with-health-insurance-india/
[4] https://www.livemint.com/Money/jRBcsTMCbrkX9nCMOI69rM/Young-Indians-are-buying-health-insurance-online.html
[5] https://www.hrblock.in/guides/income-tax-section-80d-deductions/
[6] https://www.fincash.com/b/insurance/section-80d-income-tax-india
[7] https://www.thehindubusinessline.com/money-and-banking/coming-a-savings-account-with-your-health-insurance-policy/article21069271.ece1
[8] https://www.reportlinker.com/data/series/_36Eb0IWK1Q
[9] https://www.businesstoday.in/moneytoday/cover-story/rise-in-medical-costs-should-be-covered-in-health-insurance/story/185680.html
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