Health Insurance And Tax Benefit

Health is Wealth or You may say Health is the greatest assets for a human being. Our overall health is severely affected by our lifestyle. Unhealthy Eating Habits, Lack of Adequate Sleep, Stress can affect our health. A Mediclaim policy acts as savior & it protect you from facing a financial crunch in a medical emergency. Since Inflation has made medical bills costlier, having a heath insurance policy is necessary as other necessities.

There are dual benefits of the health insurance. First it ensures your financial stability and give coverage against expensive medical bills and also offer you benefit of Tax Deduction under section 80D upto Rs.25,000/- to Rs.30,000/- (for Senior citizen).

In order to enjoy tax deductions along with health coverage, you need to check which policy suits you & your family and how much premium required for. The premium amount paid by you can be utilize as Tax Rebate Tool. Remember, if the premium paid by your employer, you will not be eligible for tax rebate. Under the IT Act, 1961 medical allowance is not considered as an allowance, which is exempted. 

Generally, medical allowance is confused with medical reimbursement. Medical reimbursement is paid by an employer to their employees when they submit medical bills. 

When it comes to tax planning, people generally don't consider their parent's health insurance as a tax saving tools. If you are paying for your parents health insurance, you can claim upto Rs.30,000/- as tax deduction benefit in your annual income tax return. 

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Which is better Paid-Up or Surrender?

A life insurance policy in which if all the premium payments are complete till some specified period and insured person is free of all payment obligations and the policy stays intact until insured's death or termination by its maturity or Surrender of the policy is called Paid-Up Policy.

Life Insurance Policies usually last the insured person's lifetime or maturity period, but some some policies can be paid up completely till a specified period. Only Traditional Life Insurance Plans can be a Paid Up Policy. 

It is calculated as the ratio of number of premium paid to the total number of premiums payable multiplied by the Sum Assured value.

 i.e. Paid-Up Value = No. of Premium paid /No. Premiums Payable X Sum Assured.

For Example:  Pradip has one traditional Endowment Policy having Sum Assured Value Rs.2,00,000/- and the policy tenure is 16 years. Unfortunately Pradip did not able to continue his policy after continuing is upto 8 years full premium paid. 
Now from very next year he did not paid any due premium to make it continue, hence very next year this policy become automatically a Paid-Up policy.

Which is better Paid-Up or Surrender of Policy?

Now, Pradip has two option either he can go and surrender his policy by providing all necessary documents to the branch or let it become Paid-Up.

Also Read : How To Surrender An LIC Policy ??

A Policy can be paid-up from next premium due. Suppose I continue my policy up-to 8 years and from next year I fail to pay premium then it become automatically Paid-up to its proportionate to its  premium paid ; Payable And Sum Assured.

Every Insurance Plan has it surrender value which can be known from servicing branch. Its is approx 30% of Sum Assured in regular plan and up-to 90% in single premium plan.

If we calculate in both condition then we can make comparison itself and understand which is better. For Example you have S.A.=2,00,000/-; Tenure - 16 Years; Premium - Rs.13000 (Approx); Premium Paid up-to full 8 years.

Surrender Value : Rs.2,00,000 X 30% = Rs.60,000/-  (Immediate Payment)

Paid-Up Value : Rs.2,00,000 X 8/16 = Rs.1,00,000/- + Vested Bonus  (Payment after death or maturity)

You can decide which is better. On Surrender you will get immediate payment while on letting Paid-Up of Policy you will get after death or maturity which ever is earlier)

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How to Surrender an LIC Policy ??

Why we are thinking to surrender the policy while we take it to secure future from financial Problem or Unexpected other risk. Some time we take to save tax U/s.80C also.

REASON TO SURRENDER : 

There may be so many reasons to get it surrender. Might be you are not satisfy with the term & conditions or having some financial problem.

But before going to surrender your policy bond,  you need to check that does your policy has surrender values.

All endowment or money back insurance plans accrue a surrender value after certain (lock-in) period.

Generally insurance policies acquire surrender value completions of three years of your policy. This may varies than the amount of premium paid.

Remember Term Insurance / Health Insurance policies are pure protection plans and do not accrue any surrender value.

Once you have decided to surrender your policy, here is how you go.

REQUIRED DOCUMENTS : -

I.   Original Policy Bond / Certificate

II.  Photocopy of last premium payment receipts

III. Photocopy of latest unit balance (in-case of market linked plan)

IV.  Application for surrender value or LIC SurrenderRequest Letter

V.   LIC Form No. 3510/5074

VI.  LIC NEFT Mandate Form

VII. One Cancelled Cheques / Photocopy of Passbook (NEFT/RTGS Purposes)

All forms are self explanatory, fill all the forms accordingly and have some revenue stamps may require. With the above documents visit your home /servicing branch (office from where policy bond is issued). You can find it on your policy bond or on policy receipts. Only Policy holders can surrender the Policy Bond.

After verification all documents LIC officer will issue an Acknowledgement Receipts for the same. Surrendered process may take 15-20 days and the amount (Surrender Value) will be credited into your bank account directly.

POINTS TO REMEMBER : -

1. Surrender values are payable only after three full annual premium paid.

2. Surrender of policy is not recommended since the surrender value would always be proportionately low.

3. And When you decide again to go for an LIC Policy that would be with higher premium because of your    

    higher age .

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