Medical Loan vs Health Insurance: Which is a Better Option?

Medical Loan vs Health Insurance: Which is a Better Option?

In recent years, there has been a significant rise in the cost of medical treatments. Moreover, since medical emergencies can arrive at any time, many people struggle to manage the costs within their limited means. Hence, people either rely on medical insurance or opt for a medical loan.

During such times, being able to manage the costs is more important than the financial implications of the loan or insurance. Hence, people tend to opt for whichever seems to be the easier option.

However, you can plan yourself for such emergencies by deciding if you want to opt for a health insurance policy or take a medical emergency loan instead. In this article, we will compare health insurance and medical loans and try to help you find the better option for you.

Medical Loan and Health Insurance Plans

A health insurance policy is purchased much before the medical emergency strikes. You pay a premium every year for a predetermined sum insured. In the event of an emergency, the insurer bears the cost of treatment. Some certain terms and conditions need to be adhered to.

On the other hand, a medical emergency loan is a debt that you have to repay within a certain time. Usually, medical loans have a fixed rate of interest and can be repaid in instalments.

The basic difference between the two is that you can take a medical loan even after the medical emergency occurs. However, you cannot avail of health insurance after being hospitalised. Hence, health insurance is a preventive purchase, while a medical loan is a last-resort option.

Which is Better – Medical Insurance or Medical Loan?

Generally, a health insurance policy is considered better than a medical loan for the reasons mentioned below:

  • Immediate Access to Medical Facilities

If you have an active medical insurance policy, then the insurer takes care of all the costs related to your hospitalisation in case of a medical emergency. All you have to do is file a claim, and the insurer will take care of the expenses. So you don’t have to waste time applying for a loan, submitting documents, and waiting for approval and disbursal.

On the other hand, if you opt for a medical loan, the loan issuance is not instant. The financial institution might take a few days to disburse the funds. This can delay the treatment and pose additional health risks.

  • Cost-Efficient

While both health insurance and medical loans come at a cost, an insurance policy is more cost-efficient than a medical loan. The premiums of health insurance plans are usually minimal compared to the sum insured. Even if you have been paying the premium for many years, the total premium paid would be much lesser than the interest on a medical loan.

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  • Cashless Treatment

With health insurance, you have the option of availing of cashless treatment if you get admitted to a network hospital. These are hospitals that the insurer has a tie-up with. If you get admitted to a network hospital, then the insurer pays the treatment cost directly to the hospital without you having to worry about the bills or payment.

  • Tax Benefits

Health insurance can help you save tax. Section 80D of the Income Tax Act, 1961, allows a tax deduction of up to ₹25000 on premium paid for health insurance every year. However, there are no tax benefits on the instalments paid on a medical loan.

  • Added Benefits

A health insurance policy comes with a range of added benefits like free annual health check-ups, discounts on the premium amount, etc. There are no such benefits of a medical loan.

  • Credit Score

To avail of a medical loan, you need to have a good credit score. Hence, this is not an option for people who have missed instalments on other loans or credit cards. Further, if you miss an EMI, your credit score can get impacted. Hence, you might find it difficult to get any other loan in the near future. Moreover, while battling a medical emergency, missing an EMI is possible. Hence, a medical loan becomes a risky proposition.

Summing Up

While a health insurance policy and a medical emergency loan can both help you manage costs during a medical emergency, health insurance is more affordable and offers more benefits than a medical loan. Ensure that you plan for such emergencies and opt for a health insurance policy.

Opt for a loan for medical treatment only when you are left with no other options. You can visit the websites of insurers and look for health insurance comparison tools that are available for free. Use these tools to compare the features and premiums of policies and choose the best one for your family. Remember, with increasing costs of healthcare and medical treatments, a health insurance policy can be your best tool to manage costs.