Aarti Tibrewala Darooka
A chartered accountant and MBA, Aarti is an entrepreneur and financial literacy advocate. She has over 15 years of combined experience in the consulting, advisory and travel industries. A national ranker in CA, Aarti is a published author, who has written a plethora of books for children’s financial education and is currently helping build awareness for financial literacy for women through her platform, Sthreedhan.
Deepa works as an administrator with a school. She has held the job for over 8 years now. She has a 7-year old son and an ageing mother-in-law for whom she and her husband provide. She also takes care of some of the medical expenses for her octogenarian parents, who are otherwise self-sufficient.
Recently, while filing her taxes with her husband, they both realized that they seemed to be paying a lot of taxes despite covering the basics of the investment that allows an individual to claim tax deduction. They decided to consult a chartered accountant friend of theirs, Som.
Som went through their list of expenses that they had maintained for the year and realized that both, Deepa and her husband, had insurance policies but no Mediclaim. He immediately pointed it out to them. They were surprised that they needed to have any other type of insurance policy since the only ones they had always been told about were the life insurance policies. These they had taken from a well-known company around the time they had their baby. They also felt that since their employers had some form of medical insurance, they did not need to take any other policies.
Som helped them understand why they needed to know about different types of insurance policies and the importance of each. Firstly, he told them that since they each used their own vehicle for commuting, they needed to have vehicle insurance. Whether it is a 2-wheeler or 4-wheeler, vehicle insurance is a must. It not only protects you from damage due to accident but also in case of theft and in case of harm to the rider/driver. Further, the law has made it mandatory for each vehicle owner to have an insurance policy for the vehicle.
Som then went on to explain the need for medical insurance over and above the Mediclaim policy provided by one’s employer. Deepa’s company covered a range of health problems in their Mediclaim but didn’t provide for any coverage for one’s immediate family. In her husband’s case, only wife and children were covered. This meant that neither Deepa’s parents nor her mother-in-law were covered in these policies. With ageing parents, medical problems and hospitalisations are common. It is, therefore, only logical to take a policy that will cover medical expenses for them. Although the premium may be a bit higher than what it would be for a young person, it saves one from gigantic hospital bills when there is a medical emergency.
Som also explained the tax benefits of medical policies. When you take a medical policy for yourself or your immediate family, you can claim upto Rs.25,000 in medical insurance premium for self and a further Rs.25,000 on premium paid for your parent(s). You include an amount upto Rs.5,000 towards medical check-up of self or family in this limit.
Therefore, in both their cases, if they took Mediclaim policies for themselves and their dependent parents, they would get a tax benefit of up to Rs.16,660 on the medical premium paid. The government has introduced this clause in the income tax act to increase adoption of good insurance practices among individuals so that they do not get hit by huge medical bills in case of illness of a family member.
Som also told them about fire insurance policy which is a safeguard against any kind of accidental fire causing damage to your home and belongings. While it may seem like an extreme precaution, with many buildings flouting fire safety norms and electrical incidents, there is no harm in taking the extra precaution.
Deepa and her husband felt truly grateful to their friend for not only educating them on the types of insurance policies but also their benefits. After all, prevention is always better than cure!