By reducing your tax liability, you can enhance your savings greatly. A great way to avail tax deductions is by purchasing Health Insurance. On buying Health Insurance, you will gain tax deductions and protect yourself against varied medical expenses.
The Section 80D of the Income Tax Act, 1961 allows you to claim tax deductions on Health Insurance taken for yourself and your family, including parents. An illustration of the tax benefit is given below:
|
Health Insurance Premium |
Tax Deduction u/s 80D |
For yourself and your family |
Rs. 15,000 |
Rs. 4,635 |
For your parents (above 65 yrs) |
Rs. 20,000 |
Rs. 6,180 |
Total (for self and parents above 65 years) |
Rs. 35,000 |
Rs. 10,815 |
Policy holders can choose the form in which they want their policies issued paper or electronic. A policy can be bought or maintained in one form only either in electronic form or paper but not in both. However, a policy holder can choose to keep some policies in electronic form and others in paper form only the electronic policies will be reflected in his e IA account and he can use repository services only for the e policies (and not the paper policies)
No, only entities approved by Insurance Regulatory and Development Authority (IRDA) can become an Insurance Repository.
Insurance Companies cannot set up an Insurance Repository on their own nor can they hold more than 10% stake in any Insurance Repository.
Yes, you can take health insurance plan for your parents who are senior citizen. Now a days so many insurance company has designed product especially for senior citizens. You are also eligible to claim tax deduction u/s 80D upto Rs 20000/- P.A. if you pay premium for them.
Source:CAMS
No. IRDA stipulates that an individual can have only ONE e Insurance Account across Repositories, irrespective of the number of policies owned by a policy holder thus, if a person has an e IA with say Repository A, with any other Insurance Repository. All Repositories will have systems in place to check this before opening an e IA any application for a second or multiple e IA will be rejected by the Insurance Repository. All the electronic policies owned by a policy holder can be credited or held under this single e IA.
/n Source: CAMS
Yes, the e IA can be operated by the account holder only during his life time, unless, of course, he has been unfortunately rendered incapable to operate it (incapacity due to mentally unsound means or terminally ill as certified by a medical practitioner). In such circumstances, the e IA may be operated by the Authorized Representative (AR) appointed by the account holder (pl see below for details).
The account holder is strongly advised to keep the log In ID and password for online access of his e IA confidential and not share it with anyone else.
Ideally, you should insure yourself for as long as you are the critical or crucial breadwinning member of the family.
With the growing nuclear families and the typical Indian sacrificing mothers/wives. It may be prudent to ensure that the working man covers himself for his whole life; to ensure that his wife receives a lump sum upon his death.
Source: SBI Life Insurance
The Insurance Repositories will be paid directly by the Insurance Companies whose policies are held in electronic form in the respective Insurance Repository so that no charges are levied on policy holders. Insurance Companies will be able to pay these fees out of the savings that will accrue to them by the migration to issuance and maintenance of policies in electronic form.
Usually, insurance companies send information regarding the maturity of the policy in advance, along with the forms to be filled and the documents to be sent. If the required documents are sent duly completed and signed, the payment is sent by post or in certain cases, even directly credited to your bank account.
Source: SBI Life Insurance
On opening an e IA, you just need to write out a request, addressed to the Insurer, for converting your existing paper policy to electronic mode. Request Forms for policy conversion are available in all offices of the respective Insurance Repositories. They can also be downloaded from respective websites. You need to fill out a separate request for each paper policy that you wish to convert to electronic form. These requests, duly signed, can be submitted at the respective Insurance Company or at any Insurance Repository office.
If you do not have an e IA, you can submit an e IA opening form with the necessary supporting documents along with the request for converting paper policy to electronic mode.
To open an e IA, you need the fill out an account opening application form of the Insurance Repository along with the necessary supporting documents. Application Forms would be available in all offices of the Insurance Repository, once they are operational. They can also be downloaded from the respective website or you can fill out an application online at the website). You can also contact your Insurance Advisor (Agent) for an application form. You can submit the signed e IA application form at any Insurance Repository office. If you are applying to open an e IA at the time of buying a new Insurance Policy, it may be best to hand over the e IA form, along with the insurance proposal form, to the Insurance Company.
To open an e IA, you need to necessarily have either a PAN or Aadhar number. When submitting your e IA application, please ensure that you provide copies of your PAN or Aadhar, Address Proof and proof of date of birth, along with a passport size photograph. You also need to show the original of address proof for verification (the list of acceptable address proof documents is given elsewhere).
The cost of a policy could be lowered if you
Buy insurance at an early age (while the risk is lower)
Insure yourself for a long period
Insure yourself for a large sum assured; offer to pay premium annually, thereby receiving discounts
Select a low cost policy such as a Term product, which offers negligible to minimum returns upon maturity.
Do not buy riders or additional benefits that do not seem to add value to you or are available as other insurance policies at lower prices.
Source: SBI Life Insurance
It is necessary to know the following terms in order to understand a life insurance policy:
Premium - the amount of money you have to pay to continue your insurance coverage.
The premium amount depends upon
Your age
Policy selected
Mode of premium payment
Term of premium payment
Term of the policy
You could choose to pay premium monthly (as a deduction from your salary), quarterly, half yearly or annually. However, there are Single premium policies where you pay premium once only (hence you do not have the facility to make the effort of paying premium regularly).
Term - the number of years you choose to insure yourself.
The longer the term the lower the premium. Policy terms vary from a single year to a maximum of 55 years. Not all policies offer you a range of terms.
Premium paying term - the number of years you pay premium on your policy.
The longer the premium paying term, the lower the premium. Usually the premium paying term is the same as the policy term. However, some policies offer you the option of selecting a premium paying term that is lower than the policy term.
Sum Assured / Face amount - the amount of insurance cover you have or the minimum amount your family receives in the event of your demise.
Your family could get more than this amount based on the type of policy or riders that you select.
Bonus / Participating profit - is declared by the insurance company each year as a proportion of the sum assured. This amount could vary; it could be different for different policies and terms.
Although declared each year, the bonus is a lump sum payment made to the insured person upon maturity or to his family upon death, in addition to the sum assured.
Bonus is based on an insurance companys assumptions about the future performance. Like any other assumption, actual results will be more or less favourable. The longer the time being projected, the greater the likelihood of variance from the predicted values. Not all companies guarantee the amount of bonus on each policy.
Guaranteed Addition - is a declaration made by the insurance company; it states that irrespective of the financial results of the company, the company will pay the guaranteed amount of money, to the insured or his nominee.
Like the bonus amount, this is a lump sum payment made to the insured upon maturity or to his family upon death, in addition to the sum assured.
Survival Benefit - is the amount of money received at pre-fixed, regular intervals by the insured person, upon survival of the term of the policy.
Often, money received upon maturity or at the end of the term of the policy is also referred to as Survival benefit.
Maturity Benefit - is the amount of money received by the insured, upon survival of the term of the policy.
In case of policies that offer a bonus, the sum assured plus the bonus for the term of the policy is paid to the insured upon maturity. In addition, some policies offer a loyalty addition, which is paid as a proportion of the sum assured and is based on the term of the policy.
In case of policies that offer no bonus, upon maturity, the sum assured or a refund of the premium or no money is receivable by the insured (depending on the type of policy selected).
Cover or Death Benefit - is the amount of money the nominee receives from the insurance company upon the insureds death. In addition to the sum assured, this would include the bonus, if any.
If additional riders such as Accident Death Benefit or Additional Sum Assured have been selected, the amount of money receivable by the nominee could be higher.
Returns or Pre-tax yields - Interest earned on the premium, on a compounded basis, is the pre-tax yield.
Post-tax yields - If the premium paid for a life insurance policy is used as a tax deduction under section 80C, then the effective premium paid by the insured is lower. Interest earned on the effective premium, on a compounded basis, is known as the post-tax yield.
Source: SBI Life Insurance
The Insurance Repository will open an e Insurance Account within 7 business days from the date of receiving the eIA application form. On opening the e IA, the Insurance Repository will inform the applicant the particulars of the e Insurance Account and usage instructions through email and by post.
The cost of buying an insurance policy depends on:
Your age, health and the nature of work you do
Policy type selected.
Sum assured.
Policy term.
Premium paying term.
Premium payment frequency.
Riders (if any) attached to the policy.
Source: SBI Life Insurance
Looking to the present medical cost we should take min sum assured of 3 lacks. We should also keep in mind that once we will be suffered from and disease then sum assured will not increase so, we should consider higher sum assured to cover inflationary medical cost for future.
There are two methods of deciding the sum assured which is human life value and need based analysis. One should use need based analysis method for deciding sum assured. In need based analysis method we should add survivors living expenses, future value of outstanding life goals, outstanding debt, cost of dying (funeral, estate lawyer's fees, etc.) and subtracts saleable investments, and insurance already available. The difference is the sum assured required.
Insurance cover is always available for uncertain event; once we suffer from any disease it is difficult to take coverage for such disease. Life is full of uncertainties we do not know when we will be suffer from diseases and accident so, it is better to take health insurance when we are healthy. When we are healthy we have number of choices available and we can choose the best and affordable plan for us.
It is good to create a fund but once we suffer from diseases then our fund will last. Whereas in health insurance if we availed total sum assured in one policy year then again in next policy year same sum assured is available to us even if we suffer from major diseases. If we see the yearly premium of health insurance it is ranging from 1% to 3% of sum assured which is negligible. We also get the tax benefit on premium paid for health insurance.
For a regular premium paying policy, premium has to be paid within 30 days of the due date (15 days if the mode selected is monthly). The insurance company provides a grace period during which you can pay the premium and keep the policy in force. If the premium has not been paid within the grace period, the policy is considered lapsed.
Insurance companies offer various schemes that facilitate the process of reviving lapsed policies. A few are mentioned below -
Paying all the arrears of premium and the interest for the same period can revive the policy. In certain cases, the company may offer installment revival schemes, where you pay a part of the arrear along with the regular premium, and the balance of the revival amount is paid in instalments spread over a year of two years.
Under another scheme, a money-back policy can be revived by using the survival benefit under the policy (the money receivable from the insurance company at regular intervals) to pay premium plus interest. (If the survival benefit amount is lower than the revival value, you have to pay the shortfall. If it is higher, you receive the excess amount.)
Source: SBI Life Insurance
The insurance company provides a grace period during which you can pay the premium and keep the policy in force. For a regular premium paying policy, premium has to be paid within 30 days of the due date (15 days if the mode selected is monthly).
If it has been less than 3 years since you purchased your policy and not paid premium, you may not receive any money back from the insurance company.
If you have paid premium for more than 3 consecutive years, you will receive a proportion of the premium paid; depending upon the sum assured, the bonus accrued; if any, the number of premiums paid and the term of the policy. (The amount receivable is known as the surrender value.) However, please note that the surrender value will vary by company and policy.
The surrender value depends on
- Type of policy
- Amount of premium
- Policy term
- Number of years for which the premium has been paid and
- Accumulated bonus, if any.
Source: SBI Life Insurance
Section 80DDB
Deduction of Rs.40,000 in respect of medical expenditure incurred. W.e.f. 01.04.2004, deduction under this section shall be available to the extent of Rs.40,000/- or the amount actually paid, whichever is less. In case of senior citizens, a deduction upto Rs.60,000/- shall be available under this Section.
