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article
Insurance Article

Should Citizens Get Tax Benefits for Purchasing Home Insurance?

December 20 2016
Tax Benefits for Home Insurance

Home insurance premiums may be exempted in the future

Fiscal Support Needed for Home Insurance

Insurance is a way of protecting oneself from a financial loss. It provides the insured a hedge against unforeseen loss events. General insurance provides protection against loss to property, unanticipated expenses, or future income.

The government strives to improve insurance penetration, both life and non-life. It provides tax exemption for the amounts paid as premium for life insurance as well as health insurance.

The government is also involved in creating capacity for insuring risks from terrorism and motor third party damage. Property insurance is of equal importance. Almost every business entity insures its property – factory and/or office premises. Home insurance is as good as non-existent.

Individuals Consider Home Insurance Avoidable

There is an absolute lack of awareness about home insurance. Even the sections of the population that are aware of and avail life and health insurance are ignorant of the importance of insuring their homes and belongings. It does not cost much but the premium for home insurance is considered a cost that can be avoided. General insurance companies have negligible portfolios of home insurance.

Individuals do not find home insurance an attractive proposition as the incidence of damage to residential property due to fire, malicious destruction, or natural calamities is very low. In the few cases of damage to properties due to natural calamities like cyclone, flood, or earthquake, the government bears a huge cost. Insurance can lessen its burden.

Income Tax Relief is Necessary for Home Insurance

As in life insurance and health insurance, government intervention looks essential through income tax exemption to propagate home insurance. Premium paid for home insurance should be tax exempted. An effort is also required to educate homeowners about the economic benefits of home insurance.

The government provides a tax exemption on health insurance premium of up to ₹25,000 (₹30,000 for persons above the age of 60 years) and an additional up to ₹25,000 for health insurance for parents (₹30,000 in case parents are senior citizens). This ceiling includes exemption up to ₹5,000 spent on preventive health check-up.

The total health insurance premium in 2015-16 was ₹27,457 crore. The income tax foregone by the government because of tax exemption on health insurance premium would be insignificant as only a small portion of the total premium is paid by individuals.

Fiscal support by the government to home insurance will go a long way in coaxing individuals to buy home insurance. The fiscal impact of income tax exemption for home insurance is likely to be inconsequential, while the gains that would accrue from spread of home insurance would be very significant.

Related Article:

Protect your Home from Fire
Protecting Your Home against Flood Damage

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