Medical Loan Vs Health Insurance: When to use?

10 min read Posted on 31july 2025

Medical emergencies are unpredictable and can cause significant financial strain. Whether it’s an accident, illness, or major surgery, you’re often left with two choices: opt for a medical loan or rely on health insurance. Understanding the differences between medical loans vs health insurance can help you choose the right option in a crisis.

Definition

• Medical Loan: A personal loan for surgery or treatment, typically availed when immediate funds are needed for healthcare expenses not covered by insurance.
• Health Insurance: A preemptive financial safety net that covers specific hospitalisation and treatment costs, based on the policy terms.

Medical Coverage

• Medical loans are emergency funds for hospital expenses loan interest, that can be used for surgery, therapy, medication, and hospitalisation without any limit.
• Health insurance has restrictions depending on the type of insurance and the sum assured by the insurance company. There’s no guarantee of reimbursement for specific illnesses or at all hospitals.

Understand Health Insurance Terms in Detail

Importance of Health Insurance

Who is Eligible for Health Insurance

Documents Required For Health Insurance

Family Floater Health Insurance

Health Insurance Without Medical Checkups

Standardization of Health Insurance Policy

Best Time to Buy Health Insurance Plan

Things to Remember When Buying a Health Insurance Plan

What is The Difference Between Mediclaim Insurance and Health Insurance?

Payment Structure

• A medical loan provides a lump sum amount that can be repaid with interest. The rate of interest varies from one financial institution to another. It comes in handy for emergency treatments.
• In a health insurance policy, a policyholder pays regular premiums to get more coverage yearly. It’s a planned health policy coverage.

Financial Impact

• You get medical loans that involve interest. It’s best suited for emergency and high-cost requirements.
• Health insurance mitigates the probable risk of incurring high medical costs by sharing the burden. Owing to fixed premiums, budget planning becomes simpler. It’s more suitable for middle-income Indian families.

Process of Loan Application and Approval

• The medical loan application and approval are faster, especially in emergencies. Minimal documentation required.
• Health insurance approval requires underwriting and the insurer’s approval. Covering specific health issues and medical coverage would come with waiting periods.

Usage

• Based on your financial needs, medical loans are available when you need them.
• On the other hand, health insurance requires periodic renewal regardless of whether it’s claimed or not. In the case of a missed premium, the amount would be irredeemable when needed.

Medical Condition

• The medical loan emergency doesn’t depend on your present health condition. It would be available even during life-threatening situations.
• In contrast, health insurance may not be applicable if you are seriously ill.

Inflation

• With increased medical costs, it would be unaffordable for many people to afford quality medical treatment when the patient needs it the most.
• Health insurance policies only cover some expenses, while medical loans allow you to get the desired amount.

Impact on Credit Score

• Availing a medical loan requires a substantial credit score, which would increase or decrease depending on the on-time repayment percentage.
• The credit score wouldn’t apply to health insurance, as you can claim the amount you used for hospital bills through health insurance.

Tax Savings

• Medical loans often don’t offer tax benefits like tax savings or deductions.
• In health insurance, you can claim a tax deduction under section 80D.

Use Cases: Medical Loan

Medical loans come under personal loans, referred to as emergency medical financing in India. The use cases of medical loans are:

• Providing emergency treatment to your loved ones without insurance or with insurance that doesn’t offer sufficient coverage.
• Coverage of cosmetic surgeries, dental implants, mental ill-health, or IVF, that aren’t covered by health insurance.
• Medical loans are used for Ayurvedic or homoeopathic treatment, which health insurance doesn’t cover.
• Medical loans are helpful when treatment is provided to patients in hospitals that insurance companies haven’t listed.
• Used for purchasing medical equipment or home care such as wheelchairs, oxygen machines, dialysis machines, or setting up an intensive care unit at home.
• Used for non-hospitalised expenses for outpatient medication and physiotherapy.

Use Cases: Health Insurance

Designed explicitly for Indian middle-class families, health insurance is used in cases like:

• Hospitalisation costs include room costs, ICU fees, surgeries performed, visits of the duty doctors, and more.
• Daycare procedures, including minor surgeries or treatment, wherein the patient doesn’t need to be in the hospital for 24 hours or less.
• Used for covering diagnostics and routine check-ups periodically.
• Used for the coverage of critical health issues like cancer, heart problems, paralytic strokes, etc.
• Used for the delivery expenses of expectant mothers.

When Health Insurance Is Better

Health insurance is a better option when:

• You seek long-term protection from rising medical costs.
• You want to avoid debt and prefer fixed annual premiums.
• You're eligible for tax deductions under 80D.
• You're financially planning for future medical needs.

When Medical Loans Make Sense

Medical loans are better when:

• An unexpected emergency arises, and you don’t have insurance.
• Immediate treatment is required, and insurance coverage is insufficient or pending.
• You need to pay for treatments not covered by health insurance.

How RenewBuy Can Help You Choose the Right Option?

RenewBuy, one of India’s leading health insurance platforms, offers personalised insurance plans that cater to individuals, families, and senior citizens. With comparison tools and expert support, RenewBuy simplifies decision-making, whether you’re choosing a long-term policy or exploring financing options. To secure your healthcare needs, explore health coverage or urgent medical loans with RenewBuy.

Key Takeaway

Understanding the difference between medical loan vs health insurance essential when making informed healthcare financing decisions. Health insurance is ideal for planned medical needs and long-term financial security, offering coverage with minimal out-of-pocket expenses. However, medical loans offer fast, flexible financing when faced with emergencies, high-cost treatments, or expenses not covered by insurance. Choosing between the two depends on your financial preparedness, existing insurance coverage, and the urgency of the medical need.

Disclaimer: The content published in this article is intended solely for the readers' informational purposes and should not be relied upon for personal, medical, legal, or financial decisions. It is advisable to seek advice from a qualified professional regarding specific concerns. The details provided regarding the plan are for reference purposes only. Please visit the insurer’s website for the latest updates on the plan. The company does not guarantee suitability, reliability, timeliness, or accuracy of the information, services, or any other aspects mentioned in this regard for any purpose. We do not endorse any insurance company or insurance product provided by any insurer.