Union Budget 2018 & Healthcare Insurance


Insurance is one of the key elements of personal finance. A perfect tool to mitigate the risk of life and health which enables you to stay focused on your objective of wealth creation. To encourage people to buy insurance the government, through IT act, provides various concessions if you spend on life and health insurance. You can save a plenty of tax if you are paying for insurance on the regular basis.

In the union budget 2018, insurance was the focal point. Finance Minister Arun Jaitley gave a bumper surprise to the insurance sector with the proposal of the new healthcare scheme. Though the budget received quite a flak from the middle class and the investors, the big insurance scheme was one of the highlights of Budget 2018. Needless to say the insurance sector was jubilant with the announcement.

The government has already given subsidised insurance cover to all the citizen under the schemes like Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY). Through its earlier initiatives, the government had made its intentions clear of focusing on the health care. With the announcement of the new scheme - National Health Protection Scheme, the government is promising to provide health insurance cover worth Rs.5 lakh per family to over 10 crore economically vulnerable families. PM Modi has proclaimed that NHPS is world's biggest government-sponsored healthcare scheme. The government has allocated Rs.2,000 crore for NHPS. The scheme will be implemented jointly by the states and the centre where the centre will bear 60 percent of the cost while 40 percent will be borne by the states.


Why Healthcare & Insurance Is Important?

NHPS is focused mainly on giving a health cover to the marginalised and people living Below Poverty Line (BPL). Hence, if you are financially well off you are not the beneficiary of this scheme. However, let's take this opportunity and try to understand why healthcare insurance is so important. The healthcare facilities are extremely expensive in our country. If you don't have health cover you are exposing yourself to high risk.

As we discussed earlier, insurance plays an important role in risk management. It is the binding glue which holds your personal finance together. Let's try to understand this with an example. Rahul is working professional and earns a handsome salary and has bright financial prospects. He is steadily marching ahead to achieve his financial goals. Unfortunately, he meets with an accident which causes serious injuries. As a result, Rahul is bed-ridden for next 6 months. Naturally, he doesn't get a salary for this period and he also has a fat pile of medical bills to take care of. But as he is a smart investor and planner, he had made the provisions for such occasions by buying a health and accident insurance. He also created an emergency fund. The accident insurance takes care all the medical bills and he draws a monthly salary from his emergency fund.

Imagine had he not got the insurance coverage he would have had to pay all the bills from his pocket. That would not only have set a huge financial hole in his account but would also have given a severe jolt to his financial plans. The important thing we learn from Rahul is that in order to safeguard your's and your family's interest it's always better to get adequate insurance cover for your life, health and automobiles.


Added Advantage - Tax Benefits

The principal goal of insurance is to give you a risk cover but there is an added advantage of buying insurance - tax saving. To encourage people to buy insurance the government gives some tax grants to those who pay insurance premiums in a disciplined manner. Under section 80C, 80D & 80DD you can claim these tax deductions. If you are paying premiums for a life insurance policy then you can claim up to Rs.1,50,000 deduction under section 80C. For health insurance, you can save income tax based on costs incurred for precautionary health check-ups during the term of the policy. The limit of tax exemption under Section 80D of Income Tax Act is Rs.25,000 if you are under 60 years of age and Rs.30,000 for senior citizens. It is the same for all the income tax slabs. You can also claim further benefits of coverage for preventive health check-ups of up to Rs. 5,000 every year.