Medical Plans – Which is more important, tax deductions or sufficient coverage?

Since the launch of the Voluntary Health Insurance Scheme (VHIS), its concessionary tax deduction has won the favour of taxpayers. Although VHIS Certified Plans provide you with the coverage of medical insurance protections as well as tax deductions, an insurance plan should ultimately be centred on your different needs at different stages of life — the same plan may not work for everyone. When those not required to pay a large amount of taxes may not be able to enjoy substantial tax concessions offered under the new scheme, being well covered medically by preparing adequate medical coverage at a young age could be more beneficial, so you can put forth more effort into your career.

Crunch those numbers for the best tax deduction

The VHIS payable premium is subject to the age of the Insured Person. According to information from the Food and Health Bureau, the annual premium for the group of 20- to 24-year-old young adults is approximately HK$2,000 to 2,400 and is around HK$4,000 for middle-aged 40- to 44-year-olds. The elderly 60- to 64-year-olds are approximated at HK$10,000.

It’s easy to calculate your concessionary tax deductions:
VHIS annual premium (i.e. amount of concessionary tax deduction, each Insured Person is allowed a maximum concession of HK$8,000 from their premium paid) X tax rate = tax deductible amount.

Under the same tax deduction feature of VHIS, purchasing VHIS Certified Plans for a qualifying relative will also grant you concession tax deductions based on the premium paid for the insured relative. Using Mr. Chan as an example, if he takes out VHIS Certified Plans for both his parents and himself with a HK$8,000 premium per policy, the annual premium under VHIS would be HK$24,000 in total. Assuming his tax rate remains at 17%, he can enjoy higher tax concession of HK$24,000 X 17% = HK$4,080.

Aside from tax discounts, coverage is also a major consideration

Based on the above tax deduction formula and examples, we can see the deductible is not significantly appealing, especially for new starters in the workforce yet to have sizable incomes.

So, before considering or converting to VHIS Certified Plans, we shall compare the area of coverage and premium of VHIS Plans with those of other non-VHIS insurance plans provided by insurance companies and weigh each plan to measure which offers better protection to you and / or suits your own medical needs better.

Using 21-year-old (age on next birthday) Mr. Lee as an example, if he takes out a the vCare Medical Plan policy, which is a VHIS Flexi Plan offered by FWD, his annual premium is HK$2,025, whilst if he chooses the Standard Plan of CANsurance Full Medical Plan, his annual a premium would be HK$2,797.

Mr. Lee made a comparison between coverage and terms and conditions of the two FWD medical plans before making the decision:

The above table is a brief summary of product features and is for reference only; the information listed above are not the full terms and conditions of the insurance product. For detailed product information, please refer to the product brochure for full policy terms and conditions.
**See a detailed comparison of vCore Medical Plan, vCare Medical Plan and other FWD medical products**:

Under our CANsurance Full Medical Plan, all hospitalisations and surgery expenses are fully reimbursed as long as each claim is within the benefit limit. On the other hand, vCare Medical Plan offers a more affordable premium, with no limitations on room level or waiting period (except for HIV and its related disability), and also provides psychiatric treatments, cash benefit for day case procedure and cash benefit for top-up subsidy.

Is your company medical coverage comprehensive?

When planning for your medical coverage, you should put your own needs first and foremost and at the same time take into consideration the medical coverage provided by your current company.

All in all, people commonly devote most of the time and effort in striving for success at the early stage of career. Instead of directing all your attention to career and neglecting your personal health, you should ensure that you are well protected under comprehensive and adequate medical coverage, which often gives you the peace of mind to focus on your career.

Remark:

The above information is a brief summary of product features. For detailed product information, please read the product brochure and policy terms and conditions. The information in this website is for reference purposes only and should not be considered as an offer or solicitation for any of the products or investments mentioned herein. FWD expressly disclaims all liability for the use or interpretation by others of information contained in this website (including third party responsibility). You are advised to seek independent advice from appropriate professionals if you have any enquires with the related information.

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