Health Insurance Vs Medical Loan – Which is Better?

Medical emergencies always come unannounced. With medical inflation at its peak, it is difficult for most people to afford quality medical treatment at the right time. As a result, they either depend on health insurance policies or are forced to take a loan. If you are having a hard time deciding between opting for a health insurance policy and a medical loan, read on to find out which is better amongst the two.

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    How is Health Insurance Different from a Medical Loan?

    The major difference between a health insurance policy and a medical loan is that health insurance is purchased beforehand while a medical loan is taken after a medical emergency strikes. You may argue that why should you spend money on health insurance when you do not require healthcare facilities.

    Well! Health insurance is purchased as a precautionary measure. It ensures that you get the required financial assistance when you are faced with a medical emergency.

    You choose the coverage and pay a premium as per your budget. But if you wait for a medical emergency to buy health insurance, then you won’t be able to raise a claim because most health plans come with an initial waiting period of 30 days. Moreover, you need to buy health insurance in advance and pay a premium even if you do not raise a claim.

    On the other hand, a medical loan is a debt that you are required to repay within a set period of time. You can opt for a loan for the amount that you need after a medical emergency has occurred.

    However, you will have to pay an interest amount in addition to your loan amount if you take the loan from a bank or a financial institution.

    Is Buying Health Insurance Better than Taking a Medical Loan?

    Generally, health insurance is considered more beneficial than a medical loan. Take a look at some of the reasons why buying a health insurance policy is better than taking a medical loan:

    Avail Medical Facilities Immediately

    Health insurance plans allow you to avail medical facilities immediately as it is issued instantly. When you face a medical emergency, all you need to do is raise a claim and your insurance provider will take care of your medical expenses.

    While you may have to do a little paperwork, no time gets wasted in arranging the money.

    This may not be the case if you opt for a medical loan as the lender/ bank will take a few days to process the loan. Any delay in the arrangement of the loan will delay the treatment proving dangerous for the patient’s life.

    More Affordable

    Buying a health insurance policy is more affordable than taking a medical loan. You will only need to pay a small amount as the premium for your health insurance policy annually. Moreover, you can get multiple renewal benefits like a cumulative bonus that can reduce your premium.

    However, you will have to pay easy monthly instalments (EMI) for years, depending on your loan amount. In fact, there will be a wide difference between the premium that you pay for a health insurance policy and EMI that you will pay for the loan.

    This is especially true if the hospitalization or treatment goes on for a long period of time.

    Cashless Treatment

    One of the major benefits of buying a health insurance policy is that you get to avail cashless treatment at network hospitals. For the unversed, network hospitals are those hospitals that have a tie-up with your insurance company and provide cashless treatment facilities to the insured.

    If you avail treatment at a network hospital, your insurance company will pay your treatment cost directly to the hospital. However, you neither get cashless treatment facilities nor have any network hospitals if you opt for a medical loan.

    No Impact on Credit Score

    Maintaining a good credit score is important to avail a loan. If you were planning to take a loan to buy a house or a car for a long time, a sudden medical loan can pose a threat to your credit score.

    By any chance, if you get delayed in repaying your loan amount or even the EMI, it can lower your credit score. As a result, you may be denied a fresh car loan or house loan. But if you have a health insurance policy, its premium will have no impact on your credit score.

    Thus, you can avail medical treatment as well as opt for another personal loan if you choose health insurance over a medical loan.

    Tax Savings

    Another reason why you should opt for a health insurance policy over a medical loan is that health insurance helps you to save tax. As per Income Tax Act, Section 80D, the premium paid for a health insurance policy is eligible for tax deductions.

    While senior citizens can save up to Rs 50,000 per financial year, people below 60 years of age can avail tax benefits on health insurance premiums for up to Rs 25,000 in a financial year. But when it comes to a medical loan, no such tax-saving benefits are available on the EMI amount.

    Additional Benefits

    When you buy a health insurance plan, you get a few additional benefits apart from the coverage that you have paid for. Benefits, such as annual health check-up facility, cumulative bonus, long term policy discount, online discount, etc. are available under health insurance for no extra cost.

    However, no such additional benefits are available if you opt for a medical loan and hence, health insurance emerges as a better bet.

    In a Nutshell

    When a medical emergency strikes, both health insurance and a medical loan can give you financial assistance to pay for the treatment. Nonetheless, health insurance is more affordable and provides wider benefits as compared to a medical loan.

    Therefore, we recommend you to buy health insurance if you haven’t already so that you are prepared to deal with any medical emergencies. You can also compare health insurance plans online on to get the best deal.

    Written By: PolicyBazaar - Updated: 16 November 2021

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