Health Insurance 603 views April 14, 2021

Multi year health insurance plans are those plans where you can pay the premium of more than one year (up to 2 or 3 years) in a single installment. Under this type of health insurance plan, the premium amount remains fixed throughout the policy period. So, you don’t need to worry about any increase in the premium amount at the time of policy renewal.

Multi year health insurance plans are perfect for those individuals who want to get a long-term health insurance policy to protect their finances from any mishap. Health insurance companies also provide a discount on paying a premium amount of more than one year that you don’t get in single-year health insurance plans. The discount on premium tends to be different on choosing a 2-year or 3-year policy from one insurance plan to another. Besides, you can also get tax benefits on the premium paid towards multi year health insurance plans. In this article, we will discuss the same. So, let’s start!

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Tax Benefits on Choosing Multi year Health Insurance Plans

Most people think that the premium paid towards multi year health insurance plans does not qualify for tax benefits under Section 80D of the Income Tax Act, 1961. It is not true! Policyholders can avail of the tax benefits on a multi year health insurance plan (single premium) equal to the proportionate amount.

How to calculate this amount? Well, you only need to divide the single premium amount paid towards the multi year plans by the number of policy years. Also, this deduction will be within the individual tax deduction limit as mentioned in the below table.

SituationsTax Deduction for Self, spouse and dependent children (In INR)Tax Deduction for Parents (In INR)Total Deductions (In INR)
If all the insured members are below 60 yearsUp to 25,000Up to 25,000Up to 50,000
If both the eldest member in your family (self, spouse and dependent children) and parents are above 60 years of ageUp to 50,000Up to 50,000Up to 1 lakh
If parents are above 60 years of age but the eldest member in your family (self, spouse and dependent member) is below 60 years of ageUp to 25,000Up to 50,000Up to 75,000

Note: Do remember that tax benefits on premium payment will only be available when you pay by any mode other than cash.  

Let’s understand the tax benefits of multi year health insurance plans with an example!

Suppose a 45-year individual chooses a 3-year health insurance plan with a single premium of INR 33,000. The proportionate amount will be INR 11,000 (33,000/3). So, he can enjoy a tax benefit of INR 10,000 per year under Section 80D of the Income Tax Act, 1961.

As you can see from the above table, if an individual is below 60 years of age, the maximum deduction per year can be INR 25,000 on the premium payment towards multi year health insurance plans. Do remember that health insurance companies also issue a certificate mentioning the deduction amount that a policyholder can claim each year while purchasing a health insurance plan.

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