(Photo: iStock)
(Photo: iStock)

Group health plans don’t guarantee renewal

  • Annuity payouts are taxable as income in your hands
  • An individual health insurance plan has guaranteed life-long renewal

My employer provides a health insurance policy which covers me as well as my wife and parents. But it does not cover my son, who is two and a half years old. I’m 47 years old and my wife is 40. I would like to have my son covered under a good health scheme. We have a bank account with a public sector bank, which provides a health policy to its account holders. Should I go for it or look for a different one? Please suggest.

—Name withheld on request

The health insurance policy offered by your bank is likely a group health plan which banks usually offer to their account holders. Group health insurance plans are generally low-cost plans that offer superior benefits. However, these plans come with some limitations.

First, group health plans do not promise life-long renewability. You enjoy coverage for as long as you hold an account with the bank or as long as the bank sponsors the cover. If you close your bank account or the bank opts out of the group health plan, the coverage would cease. An individual health insurance plan has guaranteed life-long renewal, and prices are not dependent on the claims experience of the individual policy. You should opt for a plan that offers high no-claim bonus.

You can look at Mint SecureNow Mediclaim Ratings to get a comparison of the health insurance plans available in the market.

I recently bought a unit-linked pension plan but I am unsure of what the tax implications of this are. Will my premium qualify as a tax-free deduction? Would the benefits paid by the plan also be tax-free?

—Name withheld on request

The premiums that you pay for a life insurance pension plan are allowed as a deduction under Section 80CCC of the Income-tax Act, 1961. The maximum deduction you can claim under this Section is 1.5 lakh.

On maturity, one-third of the accumulated fund value can be commuted. This means you can withdraw one-third of the fund value as lump sum. This withdrawal is tax-free under Section 10(10A).

However, the remaining two-third of the corpus must be used to purchase an annuity. Remember that annuity payouts are taxable as income in your hands.

Abhishek Bondia is principal officer and managing director, SecureNow.in. Queries and views at mintmoney@livemint.com