Advantages of paying health insurance premiums through credit card EMIs

• Premiums as low as Rs12/day for coverage of Rs.4 Lakhs*
• 10,000+ hospitals for cashless treatment
• Claim up to Rs. 55,000 deduction under section 80D**

While everyone understands the importance of health insurance, the number of takers for health insurance in India is still low. This scenario is even worse in rural areas where a large chunk of the population do not have any form of health insurance. Central and State governments are coming up with innovative health insurance plans to bring the poor families in the insurance ambit.

Cost is one big factor often cited for the low penetration of health insurance in India. Though the cost of health insurance has come down significantly in the recent years, it is still out of reach for most people in our country. In order to make it more affordable to people, the Insurance Regulatory and Development Authority of India (IRDAI) came with a regulatory move that allows insurers to accept premium charges in easy monthly instalments (EMIs).

Advantages of premium payment through EMIs

Paying health insurance premiums on a monthly basis comes with its own set of advantages. This move is expected to benefit the masses in the following ways:

• People with low monthly income can now afford better health insurance covers. When people had to shell out the full annual premium amount in one go, it may not fit within their monthly budget in most cases. This way, people can pay premiums on a monthly basis and get easy access to medical insurance policies.
• This move provides more health insurance accessibility to people in rural areas. A report released two years ago stated that only 15% of the rural population in India have access to health insurance. With a monthly payment option, people in rural areas can afford to spend on health insurance.
• In the past, customers who wanted to opt for higher sum insured could not afford to pay the high premium costs in a single lump sum payment. With monthly EMI payment through credit cards, customers can now opt for higher sum insured and have access to better health insurance coverage.
• In addition to providing more accessibility, this could also increase the awareness about health insurance in our country. Imagine a person paying for his surgical expenses (say about Rs.2 lakh) simply by paying Rs.500 a month in premiums. Such a thing could make his friends and family members opt for health insurance, thereby increasing the overall awareness.
• The premium amount paid for health insurance is eligible for tax deductions as per Section 80D of the Income Tax Act. This tax relief can be claimed even if the premiums are paid in monthly instalments.

Cons that cannot be ignored

While the advantages of opting for health insurance through monthly premium payment are plenty, there are a few cons that could not be ignored here. One of the biggest disadvantages here is that policyholders could miss out on premium discounts by opting for monthly EMI payments. In most cases, monthly EMI payments come with extra loading on the base premium charges. For instance, many insurers charge 3% extra for half-yearly payments, 4% extra for quarterly payments, and 5% extra for monthly payments.

While premium loading will increase the overall costs, policyholders who opt for monthly payments may also miss out on the discounts offered when the premium amount is paid in lump sum. As per the IRDA regulations, insurers now provide a 10% discount for a 3-year term and a 7.5% discount for a 2-year term. By opting for monthly or quarterly payments of premium charges, policyholders may miss out on these discounts. Moreover, most health insurance companies offer EMI option only for a sum insured higher than a specific amount. For instance, companies like Future Generali and Reliance offer monthly payment option for sum insured Rs.3 lakh. If customers want to opt for a lesser sum insured, they may not be able to avail this EMI benefit.

Why EMI option is better

As mentioned earlier, India is a country where awareness about health insurance is still low. In a country where affordability is a big issue, monthly EMI option through credit cards allow people to sign up for comprehensive covers that were originally out of their reach. If the EMI option is promoted effectively, it might encourage more customers to opt for health insurance covers for themselves and their families.