In a perfect world, we would forever be young, healthy, and happy. Unfortunately, we don’t live in an ideal world. A health scare can catch us unawares at any time; hence we should be ready to deal with it in the best way possible.

Other than the emotional and physical trauma, a medical emergency 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.

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.

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 for other health concerns. It is extended by both banks and NBFCs.

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’s the difference?

A medical loan is taken after one is hit by an unexpected illness to help meet expenses, whereas health insurance is bought as a precautionary measure in case an exigency strikes.

A medical loan covers literally all expenses – hospitalisation, 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 insures. For example, health insurance may cover just hospitalisation 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.

What about the cost factor? 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

  • Easy to get approved and processed
  • Requires only basic documentation
  • Covers any and all costs
  • Is a collateral-free loan
  • Can be repaid in easy instalments
  • Can be availed by any earning individual
  • Is disbursed within a couple of days
  • Provides flexible tenure and EMIs
  • Can be availed up to Rs 25 lakh

Advantages of health insurance

  • Provides cashless hospitalisation
  • Covers big bills at a small cost
  • Saves you from financial stress
  • Offers flexibility on the type of insurance and amount
  • Can easily be bought online
  • Gets you tax benefits
  • Provides free annual basic health checkup
  • Can be availed up to Rs 1 crore by certain insurance companies

Downsides of health insurance

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 a 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 hospitalisation 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 a major surgery), a medical loan can be your saviour. NBFCs such as Tata Capital provide personal loans for medical emergencies, with interest rates starting as low as 12% (this varies depending on loan amount, employment status, etc.). There is minimum 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.

Exercise, eat well and stay positive. If a health issue strikes regardless, be battle-ready.

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