I am planning to buy health insurance through the Apollo Munich Easy Health Standard - Family floater. I am 40 years old and have a wife and two kids. Please confirm if my decision is correct. The policy provides a discount of 7.5 per cent if the premium is paid for 2 years in one payment. But do I get the tax benefit under section 80D for 2 years?
- Jagan Mohan Reddy
Apollo Munich Easy Health is a good policy. Just be sure to fill the form correctly and disclose all relevant information to avoid any problems at time of claim. Apollo Munich provides an option to pay premiums for two years and obtain a 7.5% discount on total premium. However, deduction under Section 80D will be available only for the year in which premium is paid. Which option suits you will depend on the net premium you have to pay under the options. We have made several assumptions to calculate net premiums. The assumptions are:
- Your wife is in age range of 18-34 years and your two kids are under 16.
- You fall in the 30% tax bracket.
- You and your family members are non-smokers and healthy.
Case 1: If you pay two-years' premium in one go and get the benefit of deduction for year 1 only.
| (in ₹) | |
| Discounted Total Premium | 25892 |
| 30.9% tax on deduction of Rs.15000 | 4635 |
| Net premium after tax | 21257 |
Case 2: You pay annual premiums without discount and enjoy deduction for both the years.
| Â Â Â Â Year 1 | Â Â Â Â Year 2 | |
| Total Premium | 13996 | 13996 |
| 30.9% tax on ₹13996 | 4325 | 4325 |
| Net premium after tax | 9671 | 9671 |
| Total Premium | 19342 | |
As it is clear from the example that the second option is more beneficial if you fall in line with these assumptions. You may create an illustration for you in the same manner and see which option works for you.
This article was originally published on July 28, 2014.
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