Fri. Dec 1st, 2023

The taxability of insurance claims received on death is an important aspect that needs to be understood. While the death of a loved one can be an emotionally overwhelming experience, the financial implications that come along with it can be equally daunting. 

In this article, you will learn about the taxation rules for insurance claims received after a person’s death. Furthermore, you will learn tactics to maximise your advantages within the boundaries of the law. By the end of this article, you will better understand how to enhance your medical insurance and handle your monetary resources proficiently.

What is Health Insurance?

Health insurance is a type of insurance that pays for a person’s medical costs in the event of sickness, injury, or hospitalisation. It is a legal agreement in which the policyholder pays the insurance business a premium in exchange for the insurer covering their medical costs. Some benefits of healthcare insurance include: 

1. Financial Protection

It provides financial security against unexpected medical costs, which could put significant financial pressure on you or your family.  

2. Cashless Hospitalisation

Most health coverage policies offer cashless hospitalisation, where the insured can avail of medical treatment at network hospitals without paying upfront. This means direct payment is made to the hospital by the insurer. 

3. Tax Benefits

Under Section 80D of Income Tax Act, which offers a deduction for the premium paid, insurance premiums are eligible for health insurance tax benefit.  

4. Pre and Post-Hospitalisation Expenses

Health insurance covers all your medical expenses, including consultations, diagnostic tests, medications, and pre and post-hospitalisation expenses. Hence, you are not under pressure in your difficult times.

What Happens to Health Insurance After the Death of a Policyholder? 

However, many overlook an important consideration of what happens to healthcare insurance coverage after their death. Here, you will learn about the effects of your death on health coverage.

1. Death During the Policy Term

If you die during the policy term, your health plan will end, and the insurance company will pay out the sum assured to the nominee. The nominee is the person appointed by the policyholder to receive the benefit of the policy in case of their death.

2. Death After Policy Maturity

If you die after the policy maturity, there will be no payout from the insurance company, and the policy will terminate. Therefore, it is important to review the policy’s maturity date and renew it accordingly.

3. Nominee’s Age

If the nominee is a minor, then the insurance company will choose a guardian to collect the benefits until the nominee reaches the age of majority.

Designating a trustworthy and reliable guardian is crucial to ensure the benefit reaches the nominee as intended. 

4. Change Of Nominee

You can change the nominee at any time during the term of your policy. The insurance company will require you to submit a written request to change the nominee. It’s essential to update the nominee in case of a change in circumstances, such as a divorce or the nominee’s death. 

Taxability of Healthcare Insurance  

As health expenses increase, more people use health insurance to cover their medical bills. It is important to comprehend the taxation of health insurance to adhere to legal requirements and obtain the maximum health insurance tax benefit. Below is some more information about the taxability of health insurance in detail.

1. Taxability of Health Insurance

You can avail deductions under Section 80D of the Income Tax Act for the best health insurance premiums paid for yourself, your spouse, and dependent children. The maximum deduction available if you are below the age of 60 years is Rs. 25,000. It is important to remember that these deductions can only be claimed for the premiums paid towards healthcare insurance policies. 

2. Taxability of Health Insurance Claims

Health insurance claims are not taxable in India. The claim amount received by the insured is tax-free, provided the claim amount does not exceed the sum insured. If the claim amount exceeds the sum insured, the excess amount is taxable under the heading “income from other sources.” 

3. Taxability of Premiums Paid by the Employer

The money paid by the employer on behalf of the employee for health insurance premiums is not taxable to the employee. However, if the sum insured exceeds Rs. 50,000, the excess amount is taxable as a perquisite in the hands of the employee. 


Understanding health insurance tax benefits and the taxability of insurance claims received on death is crucial to stay compliant and maximise your benefits. If you’re looking for a reliable insurance provider, consider Niva Bupa Health Insurance. With a wide range of health insurance policies and expert guidance, Niva Bupa is the best health insurance company in India that can help you secure your financial well-being and enjoy peace of mind. Visit their website today to know more.

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