EMIs in Health Insurance: Understanding the Essentials Before Opting for Installment Plans

Equated Monthly Installments (EMIs) in health insurance allow policyholders to pay their premiums in monthly installments instead of a lump sum. Here’s what you should know:

How EMI Works in Health Insurance

• Premium Payment: The annual premium is divided into 12 equal monthly installments.
• Interest Charges: Most insurers charge an interest rate on the installment amount, which can range between 1.5% to 2% per month.
• Payment Term: The payment term typically spans the entire policy year, usually 12 months.

Benefits of EMI in Health Insurance

1. Cash Flow Management: EMIs help in managing cash flow by allowing policyholders to pay premiums in smaller, manageable amounts.
2. Increased Affordability: Larger premium amounts are broken down, making health insurance more accessible to a wider audience.
3. Reduced Financial Strain: Paying in installments can ease the financial burden, especially during times of financial crunch.

Things to Consider Before Opting for EMI

1. Interest Rates: Understand the interest rate charged and calculate the total amount you will pay over the year.
2. Penalty for Late Payments: Missing an installment can attract late payment fees or penalties.
3. Policy Terms: Some policies might have specific terms or restrictions when opting for the EMI payment plan.
4. Claim Process: Understand if the EMI plan affects the claim process or the coverage in any way.

Calculating EMI Premiums

• Example: If your annual health insurance premium is ₹24,000 and the insurer charges an interest of 1.5% per month, your monthly EMI could be approximately ₹2,150.
• Considerations: Always factor in the interest and any additional charges when calculating your EMI.

Choosing the Right EMI Plan

1. Assess Your Budget: Ensure that the monthly installment fits within your budget.
2. Interest Comparison: Compare interest rates among different insurers to get the best deal.
3. Policy Coverage: Ensure the policy offers comprehensive coverage despite the payment plan.

Opting for an EMI plan in health insurance can be beneficial for managing premiums, but it’s crucial to understand the terms, interest charges, and potential penalties before making a decision.

The concept of Equated Monthly Instalments (EMIs) has expanded beyond buying homes and cars, and is now being used to purchase health insurance policies. With medical inflation on the rise, health insurance premiums have increased significantly, making EMIs an attractive option for those who cannot afford to pay the full premium upfront. However, health insurance EMIs come with a significant disadvantage that is often overlooked. When making a claim under an EMI option, all subsequent instalments become immediately payable, meaning that the entire insurance premium must be paid when filing a claim.

This can be a significant burden, especially for those who are already struggling with medical expenses. Moreover, if the insured person fails to pay the remaining instalments, the claim may be rejected outright. Insurers may also deduct the pending instalments from the claim amount, leaving the policyholder with a reduced payout. It is essential to understand the terms and conditions of health insurance EMIs before opting for this payment mode.

Some key things to consider when buying a health insurance policy under EMIs include the grace period, discounts on claim-free periods, credit checks, and the ability to switch from EMIs to a regular payment mode. Health insurers typically offer a grace period of 15 or 30 days to pay the instalment premium due, during which coverage will be available. However, if the instalment premium is not paid within the grace period, the policy will be cancelled.

Additionally, some insurers do not offer discounts on claim-free periods if the policy is bought under EMIs. Credit checks are also conducted to assess the policyholder’s creditworthiness, and a low credit score may make it difficult to get the EMI approved. Finally, health insurance products bought on EMIs can only be switched to a regular payment mode during renewal, which can add complexity to managing finances.

While EMIs may seem like an attractive option for health insurance, they can ultimately lead to higher costs and are risky from a coverage perspective. It is crucial to carefully evaluate the terms and conditions of health insurance EMIs before opting for this payment mode, and to consider alternative options that may be more cost-effective and less risky. Ultimately, EMIs should only be considered as a stop-gap arrangement, and not as a standard mode for making health insurance payments.