EMIs in health insurance: What you need to know before opting for installment plans

Equated monthly instalments (EMIs) have expanded in scope and size turning into a handy tool for those who want to buy a whole range of things—from homes and cars to refrigerators and mobile phones. You can start enjoying the product even without fully owning it by making small payments every month, quarterly or half-yearly.

With medical inflation rising, health insurance companies have hiked the premiums, in some cases by a hefty 30%, in recent months. As a result, health insurance EMIs are being offered as a solution to manage high premium payments.

But unlike traditional EMIs, health insurance products bought on instalments have a significant disadvantage that is seldom discussed. While making a claim under an EMI option in health insurance, all subsequent instalments will become immediately payable. To put it simply, you have to pay the entire insurance premium when you are filing a claim.

“In the event of a claim, all subsequent premium instalments shall immediately become due and payable,” leading health insurers said in their terms and conditions for policies bought through instalments. “The company has the right to recover and deduct all the pending instalments from the claim amount due under the policy,” insurers said.

There have also been several instances of insurers rejecting claims in total for policies bought under EMIs stating that instalments due are greater than the estimated and approved claim amount. Failure to pay the remaining instalments will result in the outright rejection of your claim. Here are a few other things that you should know before buying a health insurance policy under EMIs.

Grace period

Health insurers offer a grace period of fifteen days when the premium payment mode is monthly. In all other cases, they offer a grace period of thirty days to pay the instalment premium due for the policy. “During such grace periods, coverage shall be available, if the premium is paid in instalments during the policy period,” insurers said.

The insured person will get the accrued continuity benefit in respect of ‘waiting periods’ and ‘specific waiting periods’ if the premium is paid within the stipulated grace period. If the instalment premium due is not received within the grace period, then the policy will get cancelled.

Discounts on claim free period

Health insurers offer discounts that can vary from 10%-30% if no claims are made during the policy period. But several insurers do not offer this benefit if you buy your health insurance policy under EMIs. “Tenure discount will not be applicable if the insured person has opted for premium payment in instalments,” Care Health Insurance said in its conditions for ‘Ultimate Care’ policy.

Credit checks

Since you are buying the policy through EMIs, insurers will do a credit check to assess your creditworthiness. If your credit score is below the desirable level, you will find it difficult to get the EMI on your health insurance approved. “Some health insurance companies may require a credit check before approving an EMI payment plan. If you have a low credit score or a history of late payments, you may have difficulty (in) getting approved for an EMI payment plan,” Acko Health Insurance said in its explainer on health insurance EMIs.

Switch possible only during renewal

Health insurance products bought on EMIs will remain in the ‘instalment mode’ till the completion of the policy period. You can switch your health insurance policy from EMIs to a regular one only during renewal. This will only add an extra layer of complexity in managing your finances as you have to track the payments and ensure that sufficient funds are available in your account to pay the EMIs.

Though EMIs in health insurance appear attractive on paper, it would only lead to higher costs ultimately and is quite risky from a coverage point of view. It can only be a stop-gap arrangement and should not become a standard mode for making health insurance payments.

Allirajan M is a journalist with over two decades of experience. He has worked with several leading media organisations in the country and has been writing on mutual funds for nearly 16 years.