Why do most people invest in term insurance? The biggest reason is the need to financially protect their families in the future in case of any unforeseen tragedy. At the same time, many invest in term policies to gain higher tax benefits, as term insurance premiums enable tax deductions of up to Rs. 1.5 lakh under Section 80C.

At the same time, there are tax exemptions on the lump sum payouts to the nominees of policyholders under Section 10 (10D). But what about Section 80D? Does it apply to term life insurance? Can it be combined with these policies? Before getting into the how of it all, let us first look at Section 80D in some more detail. 

Section 80D- A Brief Insight

Section 80D of the 1961 Income Tax Act helps people get deductions for the money spent on health insurance coverage. Money deployed to pay premiums for policies will be eligible for tax deductions under this section, along with all spending on family members’ healthcare needs. 

Here is a table that will give you a better picture of Section 80D deductions: 

Category of the InsuredDeduction Amount 
Self, Spouse & ChildrenRs. 25,000 if the age is lower than 60 years and Rs. 50,000 if the age is above 60 years
Parents Rs. 25,000 if the age is lower than 60 years and Rs. 50,000 if the age is above 60 years. 
Maximum Deduction AmountRs. 25,000 for those below 60 years of age and Rs. 1,00,000 for those above 60 years of age. 
Preventive Healthcare (Optional)Rs. 5,000 for all age groups. 

Health insurance is not easily available for those who have crossed the age of 80. Hence, a deduction of up to Rs. 50,000 is permissible even if one spends funds on medical treatment for them instead of premiums for health insurance. The maximum deduction possible under this section depends on your circumstances. 

If your parents are above 60 years of age and you pay the premiums for their health insurance policies, you will get deductions up to a maximum of Rs. 50,000. At the same time, if you and your spouse and children are below the age of 60, then you can get deductions up to Rs. 25,000. So, in this scenario, you can get deductions up to Rs. 75,000 under Section 80D. Rs. 5,000, as mentioned earlier, is the universally applicable deduction for preventive health checkups of family members in a financial year. It is only permissible where the insurance premium amount is lower than the maximum threshold for any category. Now that you know what Section 80D entails, you should know about some of its exclusions. 

Section 80D- What Does it Exclude? 

Section 80D does not include a few things that you should note. They include: 

  • Payments for health insurance premiums through cash. Cash payments are permissible for medical costs. 
  • Payments made on behalf of working siblings, children, and other relatives. 
  • Group health insurance premiums of employees as part of the company payroll benefits. 

So how does Section 80D relate to term insurance? Here’s how the two meet and the additional tax deductions that you may get. 

Term Insurance And Section 80D- How Do You Combine The Two? 

You can combine term insurance with Section 80D by adopting the right strategy. What does this mean? You have to select a critical illness rider with your term plan. 

You can thus get deductions up to Rs. 25,000 for premium payments for critical illness riders under term policies. While Section 80D mainly covers health insurance policies, it comes into play for term insurance plans with suitable riders. 

Hence, choose your term plan wisely; use a term insurance calculator to calculate the premium payable for your desired coverage. While this will give you tax deductions under Section 80C, you should explore critical illness and other health-related riders for additional tax deductions under Section 80D. These riders not only help you get higher savings but also add an extra layer of financial protection to your term insurance plan in case of any medical emergency or sudden hospitalization. The add-on you pay over and above your regular policy premium can be worth it.