Health Insurance vs Medical Loan – Which Should You Take to Deal with Medical Emergencies?

Health issues are on a constant rise with the increasing pollution levels and the emergence of COVID. In the national capital i.e. Delhi, many are suffering from respiratory issues due to the pollution. Those who had COVID before are finding it even harder amid rising pollution levels in the city and elsewhere. While health problems may not be within your control, getting financially prepared to deal with the same is! If you are not, better be as healthcare expenses are rising at an astounding rate of 18-20% every year in India. At such rates, you could exhaust all your savings towards an unexpected medical emergency if you stay unprepared financially. Thankfully, you have two options to deal with a medical emergency – Health Insurance vs Medical Loan.

While a health insurance plan covers you and your family against numerous health emergencies in exchange for a premium, the medical loan would help you pay such expenses in exchange for the EMI inclusive of interest. This is just a broad definition of the two. To know which is better for you would require evaluating the two – Health Insurance vs Medical Loan – based on certain aspects. Let’s evaluate and find the right pick for ourselves.

Comparison Between Health Insurance vs Medical Loan on These Points

A medical emergency inevitably brings high costs and anxious times. You would want a financial product that covers the cost adequately while also making sure you won’t have to go through so many formalities. So, we have compared Health Insurance vs Medical Loan mostly on these aspects. Check them in greater detail below.

Which Fares Better on Coverage?

Health insurance comes with different sum insured options from which you can choose the one for you. The sum insured amount can be as much as INR 1 crore, depending on the premium you want to pay. A few health insurance plans offer beyond INR 1 crore too.

Whereas a medical loan will come in the form of a personal loan. You can get the loan for up to INR 15-25 lakh in most cases. In a few cases, banks and non-banking finance companies (NBFCs) can offer up to INR 50 lakh.

The loan amount disbursal will depend on your income, credit score, employment type, etc. People with higher disposable income, a credit score of more than 750 and have work experience of more than 2-3 years stand a better chance of getting more loan amount compared to someone finding short on these parameters. A credit score is a result of your loan/credit card repayment track. A spotless payment history would help maintain a good credit score.

So, you can get more with health insurance to deal with medical emergencies.

Which of the Two – Health Insurance vs Medical Loan – Leads to Less Payment?

Health insurance is available on paying the premium annually. Depending on the sum insured amount, the number of members you want to cover under a plan, your existing health conditions, the insurance company decides your health insurance premium. For example, getting an INR 7 lakh cover for a family of four including your spouse and two kids would require an annual premium of around INR 20,000-30,000. You can convert the same into monthly installments too. The calculation is made considering you being the eldest in the family at 35 years and your eldest kid being aged 8 years.

Whereas, if you apply for a personal loan of INR 7 lakh, the equated monthly installment (EMI) would amount to INR 16,653 at an assumed interest rate of 15% per annum. The tenure taken to calculate the EMI is five years. Annually, you will incur INR 1,99,836. Not only that, the interest outgo over five years would amount to INR 2,99,177.

Cost-wise, health insurance wins over a medical loan comfortably.

Cashless Facility Option Further Tilts the Balance in Favour of Health Insurance

Health insurance comes with a cashless facility too besides the reimbursement option. The best part about a cashless facility is that the health insurance company pays your hospital bills. However, the same must be covered under the plan you choose. Also, the treatment should happen at the hospitals tied up with your insurer for a cashless facility. Inevitably, there can’t be any cashless facility when taking a medical loan. It comes into the equation only after you fall sick or get injured.

So, health insurance is the best way to prepare for such unforeseen health emergencies.

Tax Benefits Another Surplus to Have with Health Insurance

Health insurance comes with tax benefits on premiums payable up to INR 1,00,000 under Section 80D of the Income Tax Act. Whereas medical loans do not come with any tax benefits.

Medical Loan Scores More Than Health Insurance on This Aspect Though

Health insurance does cover numerous injuries and illnesses, yet it may not cover all. Plus, most plans come with a waiting period of up to 4 years for pre-existing illnesses and up to 9 months to 2 years for maternity-related complications. A waiting period means the time you need to wait for the health insurance cover to commence. Further, if you have a critical illness plan, you will need to survive for 2-6 months post the diagnosis of the illness to get the claim. Such restrictions don’t apply to a medical loan as you can get it instantly on having sufficient income and a good credit score as told above.

Conclusion

On most counts, a health insurance plan is more efficient than a medical loan when tackling medical emergencies. Not only are they cost-efficient but also offer a greater degree of flexibility with high sum insured amounts and cashless benefits. On the other hand, if you don’t have a credit history, lenders may not approve your loan as they can’t assess your creditworthiness without it. Even if they approve it, the interest rate can go up significantly higher, causing more cash outflow.