Personal Loan for Medical Purpose vs Health Insurance, Which is Better?
A health scare or a medical emergency can catch us unawares at any time and can be very expensive. There are ways to handle it without draining your life savings. Banks and Non-Banking Finance Companies (NBFCs) offer personal loans for medical emergencies that can help pay for all healthcare expenses. Another approach is to buy health insurance that covers medical expenses incurred. With different products in the market, you tend to get confused about what to choose and which one will be more beneficial for you. So, which one is a better option, a medical personal loan or health insurance? Let’s look at what these two options mean, the differences between the two, and their respective benefits so you can make an informed decision about your healthcare.
What is Medical Loan?
A medical loan comes under the category of personal loan that can be availed for various contingency situations related to health or urgent medical needs such as an operation, surgical procedure, therapy, or other health concerns. It is extended by both banks and NBFCs.
What is Health Insurance?
Health insurance is insurance that covers the whole or a part of the risk of a person incurring medical expenses. Depending on the terms, either the insured pays for the expenses and is subsequently reimbursed, or the insurance company directly pays the care provider.
What To Choose And Why?
Quick Disbursal and Faster Approval:
Quick disbursal and faster approval for a medical personal loan make it a more favourable option compared to health insurance. A medical loan is a quicker process between the two. The documentation in case of a medical loan is also minimal. It provides a big relief during a medical emergency.
Interest Vs Premium:
Depending on the insurance amount, a high premium is paid in advance, which may or may not be used before the renewal date. Since the medical personal loan is a recent product in the Indian market, the rate of interest is competitive. The repayment options are quite flexible in medical loans.
Cover or Not to Cover:
Medical insurance will not cover procedures like cosmetic surgery etc. The terms and conditions of the medical insurance are sometimes so vague that you end up paying to the hospital even when you are medically insured. On the other hand, a medical personal loan can cover your cosmetic surgery, fertility, and dental treatments, etc. Coverage plays an important role for a potential consumer of either the medical loan or health insurance. Most of the health insurance policies don’t cover STDs (Sexually Transmitted Diseases) like AIDS (Acquired Immune Deficiency Syndrome) or Cancer such as Leukemia or many brain-related ailments. A medical loan covers almost all kinds of medical expenses.
The Timeline:
If a medical emergency strikes and you use the insurance amount, you cannot reuse it in the same year or before renewal. Also, your premium increases the next year. While one can take a medical personal loan as and when required.
Discounts:
Hospitals might not give discounts and try to use the whole amount for a medically insured patient. But, if you are paying yourself, hospitals consider giving discounts.
Usage:
Health insurance makes you pay a high premium lifelong without even using it once since many medical procedures and surgeries are not covered. A medical loan is taken when you need cash for medical treatment. One can take a medical loan for a procedure or check up or surgery. The medical loan amount can also be used as saving for the future.
Risky or Not:
If you are healthy with no medical history, you get health insurance. Age plays an important factor in health insurance and premium. A high-risk individual is someone who has had major surgery or has cancer or other major ailment survivors. Logically, such a patient requires health insurance for the treatment. However, they are denied health insurance because of the high-risk factor. On the other hand, anybody can get a medical loan irrespective of the current or past medical condition. There is no such restriction to avail the medical loan. A reportedly high-risk individual can also get a medical loan.
The Amount Dilemma:
The amount given under the medical loan is as per the requirement of the individual. It can be used to pay the medical bills and expenses, fees of the doctor, admission at the hospital, ICU charges or a surgery where the money is required immediately. Under health insurance, only the ailments and surgeries specified in the terms and conditions of your insurance will be covered. If any other medical emergency strikes, you have to bear the cost from your own pocket. Ayurveda and Homeopathy are alternative medicines that some people believe in. Only a handful of medical insurance covers them. However, a medical personal loan is used for such alternative medicine with no questions asked.
Restrictions:
A person holding a medical insurance policy can go to only partner hospitals. With a medical personal loan, you can go to any hospital of your choice and convenience, be it a non-cashless hospital as you can pay cash from the medical loan disbursed to you.
Medical Loan Vs Health Insurance
| Personal Medical Loan | Health Insurance |
| A medical loan is taken after one is hit by an unexpected illness to help meet expenses. | Health insurance is bought as a precautionary measure in case an emergency strikes. |
| A medical loan covers literally all expenses – hospitalization, prescription bills, surgeries, or any other treatment. You can use the money as you deem fit for your healthcare. | Health insurance covers expenses depending on the type of insurance and sum insured. For example, health insurance may cover just hospitalization and leave out critical illness. Additionally, if you are insured for say Rs 5 lakh, it will only reimburse that amount. Anything above that will have to be paid by you. |
| A medical loan is a personal loan that has to be repaid on an EMI basis as is convenient to the borrower. | On the other hand, health insurance is an annual purchase to help mitigate health cost risk exposure. |
| You only have to get a medical loan in the hour of need. | Health insurance has to be bought every year irrespective of whether you are healthy or sick. This can get expensive as shelling out approximately Rs. 20,000 every year is not easy for all. |
| A medical loan is extended to any salaried, self-employed individual, or a pensioner. | Health insurance is given to relatively healthy individuals. Anyone who has had a major surgery such as a bypass cannot get health insurance. |
Advantages of Medical Loan or Health Insurance
| Medical Loan | Health Insurance |
| Easy to get approved and processed | Provides cashless hospitalization |
| Requires only basic documentation | Covers big bills at a small cost |
| Covers any and all costs | Saves you from financial stress |
| Is a collateral-free loan | Offers flexibility on the type of insurance and amount |
| Can be repaid in easy installments | Can easily be bought online |
| Can be availed by any earning individual | Gets you tax benefits |
| Is disbursed within a couple of days | Provides free annual basic health checkup |
| Provides flexible tenure and EMIs | Can be availed up to Rs.1 crore by certain insurance companies |
| Can be availed up to Rs.25 lakh |
The Conclusion: Which One is Better
There are certain drawbacks to health insurance as well. If you have ailments such as high blood pressure or diabetes, the cost of health insurance shoots up. There are chances of it being denied to you altogether. If you have had major surgery, no company will extend a cover to you. There are a lot of technical ‘ifs’ and ‘buts’; so if you don’t understand the insurance you are buying, there is a possibility that you will be left in a lurch in a crisis. For example, your insurance may only cover hospitalization charges and not cover medicines bought. Though there are cashless insurance products available, there are some that ask you to bear all the expenses and then submit documents to get reimbursement. Here, arranging money immediately for your treatment becomes a challenge, and later on, following up with an insurance company to clear your claim is tedious.
If getting health insurance is not part of your plan, does not fit in your budget, or you are not eligible (say, if you have had major surgery), a medical loan can be your saviour. There are a lot of lenders that provide personal loans for medical emergencies, with interest rates starting as low as 10.99% (this varies depending on the loan amount, employment status, etc.). There is minimal documentation required and the amount is handed over in a few days. The company also gives suitable advice on loan repayment based on the borrower’s financial capacity.
So, going for a personal loan to cure your medical illness, is advisable as it is more cost-effective than health insurance. Hope, based on this comparison, you can make a logical and informed choice between the two available options.