Why Buying Health Insurance is Better Than Taking Medical Loan?

Overview

More often than not, illness and injury come unannounced. Coupled with this uncertainty are the ever-rising prices of healthcare, thanks to medical inflation. While it is prudent to be prepared for any contingency, medical emergencies can often blindside you. If you are not prepared for such an urgent situation, chances are that you will have to resort to borrowing money from your friends, relatives, or even a bank.

 

Although such a loan can prove extremely helpful in a time of need, it is not a viable or sustainable strategy to manage your overall healthcare needs. With prices of medicines, tests, hospitalisation, diagnosis and even consultation fees rising, investing in a health insurance policy has become more important than ever.

 

How Health Insurance is More Helpful Than Medical Loan?

In the face of a pressing medical emergency, a loan can prove to be not only lifesaving but can also allow you to get the choicest treatment. You can either choose to borrow money from your friends or approach a bank. Both these methods, although instantly effective, pose several shortcomings.

 

Money borrowed from an acquaintance gives way to complicated social implications, which can result in awkward or strained relationships. A medical loan from a financial institution, on the other hand, is no replacement for health insurance. Here are some reasons why a medical loan may not be a sound option in the longer run:

 

- If you opt for a medical loan, you will be required to repay the bank the full amount borrowed. This is a far more expensive way of paying your medical bills, as compared with health insurance. You only need to pay a premium and claim a cover amount that is much more than what you end up spending.

- Paying a premium, whether or not you raise a claim, can be a concern for many. As opposed to this, a medical loan can be borrowed only when the need to pay hospital bills arises. However, instead of having to repay a large amount of debt, you could have invested small amounts over the duration of many years and bought yourself the peace of mind that comes with a health insurance cover.

- Additionally, you will be required to pay an interest over and above the loan amount you have to repay. So, in the longer run, borrowing a loan is much more expensive than investing in a health insurance policy.

- In the event of an illness that requires regular hospitalisation, one insurance plan can be used every year to make payments. In such a situation, medical loans will be expensive and time-consuming to acquire.

 

Why Health Insurance?

To understand how health insurance is more helpful than a medical loan, you should consider how accessible each will be during an emergency. Here are some ways in which health insurance trumps medical loans:

 

Insurance Coverage is Comprehensive

You may be able to acquire the funds needed to pay the bills by securing a loan, but it may become cumbersome to keep track of what you spend on the various bills. A good health insurance plan will cover expenses of not only hospitalisation, but auxiliary services such as dialysis, chemotherapy, alternative treatments, radiotherapy, and costs that may arise before and after hospitalisation.

 

Benefits such as annual health check-ups and second opinions from doctors based abroad are also available to policyholders. To these existing benefits, most plans will have the option of add on perks like an international cover, OPD expenses and no claim bonuses. Additional benefits such as organ donor coverage and ambulance coverage are also available to policyholders.

 

Treatment is Cashless

If you hold medical insurance, in the time of an emergency you can simply visit one of the hospitals under the policy network without having to worry about making cash arrangements. You will not be required to pay anything from your pocket, as the payments will be settled between the insurance company and the hospital. Under your plan, you will be able to choose from a robust network of well-equipped hospitals according to your needs. Such a provision is absent in a medical loan.

 

Affordability

As discussed earlier, health insurance is always cheaper and more affordable than a medical loan since the premium paid is a minuscule amount against the claim amount. Meanwhile, loans come with interest rates, which means that you end up paying more than what your treatment cost.

 

Moreover, holders of health insurance with no existing illness are often offered discounts on the premium, making health insurance even cheaper. The Income Tax Act of India 1961 also has the provision of tax exemption against the premium amount of a health insurance policy.

 

Unaffected Credit Score

Acquiring a medical loan will undoubtedly affect your credit score, making it difficult to borrow other loans for cars, houses or other reasons in the future. You can circumvent this risk altogether by choosing to invest in an insurance plan. For this reason, you should prefer health insurance to borrowing money.

 

Save Taxes

Under Section 80D of the Income Tax Act, premiums paid towards health insurance plans for individuals, spouses, children and parents qualify for a deduction. If you are below 60 years of age, you can avail a maximum deduction of Rs 25,000 for such a health insurance plan. If the beneficiary of the health policy is more than 60 years old, the maximum deduction is of Rs 50,000.

 

Peace of Mind

A medical condition affecting you or your loved ones is already distressing. Worrying about payment of hospital bills will unfailingly make a bad situation worse. Even post-hospitalisation, there is stress of repaying the loan. Insurance will allow you to undergo cashless treatment in a dignified manner.

 

Conclusion

Evidently, health insurance is a more secure and sustainable alternative to medical loans. In fact, a loan should be your last resort, in case your insurance claim is denied, or you have not set up an emergency medical fund. Loans may be difficult to secure during an emergency and burden your finances immensely.

When faced with a medical emergency, raising a claim is at your fingertips as it can be done online within minutes, making it beneficial to choose health insurance rather than a loan amount. The payment of reasonable premiums for an affordable health insurance plan, spread over a long duration, is, without doubt, more strategic and sustainable than rushing to get a loan.