Would you need a medical loan if you had a health insurance plan? If you think the answer is NO, think again.
There are still two scenarios when you may need a medical loan.
- When your insurer (or the hospital) denies cashless treatment or rejects the claim outright OR
- When the hospital bill exceeds the insurance coverage amount.
In fact, Canara bank has launched a medical loan product (Canara Heal) where one of the eligibility conditions is that you must have a health insurance plan.
Hence, clearly there is at least one bank that thinks that you may need a medical loan despite being covered under a health insurance plan. And the bank believes that the market is big enough that it has made health insurance a pre-condition for the loan. Let us find out more about the Canara Heal loan product.
Canara Bank Heal Loan: Features
- Unsecured loan of up to Rs 5 lacs.
- To be used exclusively to meet hospitalization expenses of the borrower or the family members of the borrower.
- Loan amount not handed over to the borrower. Direct remittance to the hospital.
- Moratorium of 2 months. While you do not have to repay principal during this period, you must still pay interest during moratorium.
- Loan tenure ranging from 12 months to 36 months (including moratorium).
- Available in both fixed and floating interest.
- Interest rate may range between 11.5% to 12.5% p.a. (May 2024).
Canara Bank Heal Loan: Eligibility
This is super interesting.
- You must be covered under a health insurance plan. If you are not covered under any health insurance plan, you cannot apply for this loan.
- Resident Indian citizens between 21 and 55.
- Credit score: 700 & above.
- Available to both salaried and self-employed professionals. However, if you do not have any existing relationship with Canara bank, you must be salaried to apply for this loan.
- Salaried: Minimum salary of Rs 50,000 per month. Net take home salary (after adjusting for all the loan EMIs) must not be less than Rs 20,000 per month.
- Self-employed: Average bank balance of Rs 50,000 in the past 6 months.
This is the first loan product (that I have heard of) where coverage under a health insurance plan is mandatory. In fact, the bank website clearly mentions that the loan is to meet shortfall of hospital expense. Difference between the hospital bill and the insurance payout.
I think this is a smart move, even from the perspective of credit appraisal by the bank. While I have no data to back this up, I think people who buy health insurance plans are more responsible. A desired trait in any borrower.
Canara Bank Heal: Points to Note
Canara Heal loan comes in handy in case the insurance cashless facility is not sufficient to meet the hospital bill. For instance, the hospital bill is Rs 8 lacs, and the insurance coverage is only Rs 5 lacs. You can take a loan of Rs 3 lacs to settle the bill.
I am not sure if you can apply for this loan if the hospital refuses to provide cashless treatment under your insurance plan (happens quite often), asks you to pay from pocket, and file later for reimbursement.
I cannot find fault with a product that can be a lifesaver. I would expect, given the purpose of the loan, the processing and disbursement would be quite quick. The interest rate seems a bit on the higher side, but most borrowers would take it in this situation.
At the same time, this loan is not too different from a personal loan.
Caveats
It is still a loan and must be repaid. While the product may be a good source of quick cash, you will have to expend resources to repay the loan. Can you avoid this cashflow pressure? Yes, you can. By buying health insurance.
And how much health cover should you buy? While no amount of insurance can be enough if you hit a really rough patch, it is important that you buy adequate health insurance coverage. Don’t just tick check boxes. A health insurance cover of Rs 5 lacs is not sufficient for a family of 4 residing in a big city. Healthcare costs are rising rapidly and hence it is critical that your health insurance cover can keep up.
- If buying for self, buying health insurance coverage of at least 10-15 lacs.
- If buying a family floater, consider 5-7 lacs per person. Hence, for a family of 4, consider buying a cover of at least 20-25 lacs.
You must note that the marginal cost of health insurance is not very high. The cost of a 10 lacs health cover is not double the cost of Rs 5 lac cover. It is much less.
For instance, a family floater cover for a family of 4 (eldest member: 40 years) is given below (quote from a private insurer):
- Cost of Rs 5 lac cover: Rs 24,385 per annum
- Cost of Rs 10 lac cover: Rs 28,383 per annum
- Cost of Rs 20 lac cover: Rs 38, 866 per annum
Hence, increasing your health insurance cover won’t cost you as much as you think.
Alternatively, you can also consider adding a super top-up plan to your base health plan. With a super top-up plan, the cost up to a threshold (referred to as deductible) must be borne by you (or by your base health insurance plan). Any cost beyond the threshold (deductible) is covered by the super-top up plan.
So, you have a base health insurance plan of Rs 10 lacs. To augment coverage, you buy a super top-up plan of Rs 50 lacs with a deductible of Rs 10 lacs. In this case, the first Rs 10 lacs will be covered by the base plan and the next Rs 50 lacs (if the cost runs that high) will be covered by the super top-up plan.
Additionally, a robust contingency buffer is important. This corpus can come in handy when the insurer refuses cashless treatment or when the treatment cost exceeds the insurance coverage. Yes, you will have to expend resources to replenish this corpus too (after use), but there will be much less pressure and no bank interest to worry about.