Health, these days, comes at a cost. With healthcare expenditure rising at a compounded annual rate of 12 to 15 per cent, medical expenses can take a huge toll on one’s finances. Hence, the need for proper financial planning, especially if one has members in the family who are on the wrong side of 60.

The best way to protect one’s finances from the impact of medical exigencies is to buy a health insurance. This also brings with it additional income tax benefits from the payment of insurance premium — both for one’s immediate (spouse and children) and extended family (parents).

An individual can claim a deduction of up to Rs 15,000 from one’s annual income towards the payment of health insurance premium for oneself as well as for one’s spouse and children (not more than two) and another Rs 15,000 for premium paid for health cover for dependent parents. If the parents are more than 65 years of age, one can claim a deduction of up to Rs 20,000.

Thus, a maximum deduction of Rs 35,000 can be claimed under Section 80D of the Income Tax Act towards health insurance premium.

Make the right choice

It is important to select the right health insurance plan. This is because the financial implications will differ depending on whether one opts for a medical cover for each of the family members or goes for a family floater plan.

To illustrate this let us take the example of Arun’s family comprising five members. Arun is 40-years-old, his wife is 33 and their only child is 5 years. Arun’s father is 67-years-old, while his mother’s age is 65.

Arun estimates that a sum of Rs 5 lakh is enough to take care of his medical costs in case any one or more than one member falls ill and needs hospitalisation, surgery, etc. He can either buy a health insurance of Rs 1 lakh each for every member in the family or purchase a family floater plan of Rs 5 lakh.

If Arun buys a separate policy for each member, he won’t be able to claim more than the sum assured of Rs 1 lakh for an individual member. If the actual expense is Rs 3 lakh on a member, Arun will have to pay Rs 2 lakh from his pocket.

However, in a family floater plan, the sum assured (Rs 5 lakh in the given example) floats among all the members of the family. Arun’s entire expense of Rs 3 lakh will be paid by the insurance company if he buys a family floater plan.

Hence, a family floater plan is a more efficient health cover than individual medical insurance. Besides, insurers often give a 10 to 15 per cent discount on the total premium in a family floater plan compared with individual health plans The premium cost of a family floater plan is, thus, lower than individual plans.

Separate health insurance for each member of the family is advisable only if one wants a lower cover for individual members. But if one seeks a cover in excess of Rs 2 lakh, it is better to go for a family floater.

Help for seniors

Insurers are now coming out with family floater policies where one can include the members of one’s extended family, including parents.

Most insurers have so far been offering floater plans covering only one’s immediate family members — self, spouse and children. This is because till the current financial year, income tax benefits under Section 80D were available only on premium paid for health insurance for self, spouse and children (not more than two).

Dependent parents were excluded from this benefit. There were only a few insurers who offered plans where one could include one’s parents, but here, too, the maximum age of the senior-most member of the family was restricted at 60 years. Thus, senior citizens of a family could not get a health cover, either through a family floater scheme or an individual plan.

Insurers later had come out with exclusive plans for people above 60 years of age. But the premium rates for these plans were increased by more than 100 per cent.

Tax break

Now, that an income tax assessee can claim deductions for paying the premium for parents, insurers have begun offering family floater plans where one can include not only one’s parents but also one’s in-laws.

Bajaj Allianz Life Insurance Company recently launched such a plan, called FamilyCare First. The maximum age of the senior-most member of the family could be 68 years at the time of buying the policy. The health cover is renewed every three years till one is 74 years.

This is the only family floater health plan that can be bought by people above 60 years. Another good feature of this policy is that it offers a loyalty bonus in the form of a 15 per cent discount on the renewal of premium every three years and a 5 per cent addition to sum assured for every claim-free year.

However, the policy costs much higher compared with other floater plans available in the market (see table). Competition is expected to eventually bring the price down and a beginning has just been made.