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Health Insurance vs Medical Loan – Which One To Go For and Why

Health Insurance vs Medical Loan – Which One To Go For and Why

 People can face a medical emergency at any time, regardless of their past medical history. While medical emergencies can appear in different forms for different people, one thing is quite common in almost all medical complications. That is the sense of helplessness and desperation of arranging funds to meet the expenses.

Therefore, it is wise to know and decide in advance about arranging funds to tackle such emergencies. Health insurance and medical loans are the two most common options for arranging funds for medical treatment.

Let's know the differences and benefits of health insurance VS medical loans before finalizing which one to choose.


While both health insurance and medical loans can be used to partially or fully pay off your medical bills, they are different.

Simply put, health insurance is purchased as a precautionary measure to help meet future health expenses. In contrast, a medical loan is taken after a medical emergency has already struck an individual. In both cases, you have to make regular payments, although the category of payment differs.

You pay regular premiums to continue getting medical cover from the insurer in health insurance. On the other hand, a medical loan is a debt you have to pay out with interest after receiving the loan amount.


Health insurance can often be a better option than taking a medical loan for the following reasons.

  • Instant Availability of Medical Facility
  • Health insurance plans allow the insured to file a health insurance claim when faced with any medical emergency requiring hospitalization. The claim process is quite hassle-free these days, and even hospital authorities sometimes help individuals prepare necessary documents.

    While there might be some paperwork initially, the claim amount is quickly settled once the insurer processes the claim. As a result, the insured can access the best medical facilities as early as possible.

    Now compare this with the loan sanctioning process. First, you need to apply for a medical or personal loan online or physically visit the financial institution. The lender will then examine your loan application and your personal documents to decide whether they can sanction the loan amount, which might take some time.

    Finally, the lender will process your loan and transfer the amount into your account. While today financial institutions try to approve such loans as quickly as possible, you do not want to take chances in times of crisis.

    You can see that funds can be arranged more quickly in health insurance when compared to a medical loan.

  • Affordability
  • Health insurance is more affordable than taking a medical loan if done with proper planning. For example, the premium cost of health insurance can be significantly lower if you purchase health insurance at a young age. You only need to pay small amounts of the monthly or annual premium to continue your policy. Besides, your insurance coverage can gradually increase over the year on the same premium as you keep accumulating the no-claim bonus.

    On the contrary, medical loans are unsecured loans with high-interest charges that you will have to pay through equated monthly instalments (EMI) for years. Furthermore, your loan liabilities can snowball into a large amount if the hospitalization and treatment continue for a considerable period.

  • Cashless Treatment
  • Most reputed health insurance service providers have a tie-up with many hospitals across the nation. Such hospitals are known as network hospitals. These hospitals provide cashless treatment facilities, which means that the insurance company directly pays the hospital for the treatment of the insured individual.
You can’t avail of such facilities when opting for a medical loan.

Unaffected Credit Score
Since health insurance cover is provided against the money you already paid as an insurance premium, it doesn't affect your CIBIL score. However, the medical loan amount and your loan repayment capability directly affect your credit score. While repaying it in time can boost your score, you can even be denied the applied loan amount if you have a low credit score.

Add-on Riders
You can opt for some useful additional riders along with your base health insurance, such as-

Accidental Death Benefits
Critical Illness Rider
Daycare benefits
You can avail all these additional benefits by paying a little extra premium. But, unfortunately, you can't avail of any such benefits in the case of medical loans.

Both health insurance and medical loans are effective ways to meet medical expenses. However, health insurance is a clear winner in the health insurance vs medical loan debate for the wide range of benefits and convenience it offers.


The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

হ্যালো, আমি এই ওয়েবসাইটের লেখক এবং প্রতিষ্ঠাতা জয় মজুমদার।ছোটবেলা থেকেই টেকনোলজি সম্পর্কিত বিভিন্ন বিষয়ে জানতে পছন্দ করি এবং এখন তো এটা আরো বৃদ্ধি পেয়েছে। আপনাদের সকলের সহযোগিতায়, আমাদের ওয়েবসা…

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