The ongoing Covid-19 pandemic is not only an unprecedented health crisis but has also brought financial hardship upon many people. Governments and financial institutions globally have been taking steps to provide financial relief to people. For instance, the Reserve Bank of Indian had requested banks to provide a loan moratorium facility to borrowers who can’t pay EMIs due to financial stress. Similarly, insurance companies have also come up with an EMI option to facilitate health insurance premium payments and reduce financial stress on customers.
The Insurance Regulatory and Development Authority (IRDA) in 2019 directed insurance companies to modify existing policies and create additional frequencies for premium payment. This process was expected to be completed by insurers by September 30. Many insurance companies, as a result, have adopted the EMI payment policy and many are still working on the processes to provide this option to their customers.
The EMI move provides customers with the flexibility of paying premiums in monthly, quarterly or bi-annual instalments. The move is expected to make health insurance products more affordable and popular in the country.
Let’s understand how EMI facility on health insurance works and who should opt for it.
EMI Facility – Features
There are two types of EMI facilities for health insurance premium payment available in the market: EMI facility with a credit card and EMI facility without the compulsion of a credit card. Customers can enjoy the option of paying the premium every month by using their credit card. In this option, the issuer bears the cost of the premium and the customer pays the EMI to the card company. Such EMI facility may also incur processing fees and other related charges. Make sure you understand these aspects. Standing instruction approval on a credit card is essential in this case.
On the other hand, there are health and wellness service providers in the market providing the second option under which there is no compulsion of having a credit card to avail EMI premium payment option. The EMI facility is offered through all types of the online payment system such as NEFT, debit cards, credit cards and UPI transfer. Companies offering the second EMI option facility have tie-ups with some insurance companies, and they offer exclusive insurance products from their partnered companies. It means you get the EMI facility only if you purchase a health insurance product from these companies. These companies don’t offer an EMI facility on payment of premium for your existing policy. The monthly insurance premium for a Rs. 10 lakh cover under this option comes to around Rs. 502 i.e., Rs. 6024/year for a 30-year individual living in a non-metro city. If the buyer opts for a deductible, then the premium comes down significantly.
In Option 1, the annual premium on a cover size of Rs. 10 lakh for a 30-year aged individual usually comes to around Rs. 7,000 to Rs. 10,350. If the premium is Rs. 10,350, the monthly EMI is around Rs. 897/month to Rs. 931/month i.e., Rs. 10764/year to Rs 11172/year, which means a difference of around 4% to 8% per annum from the annual payment option. If you are an existing health policyholder, renewing a policy with a monthly EMI facility using your credit card makes sense as you don’t have to forgo the accumulated benefits on your existing policy.
However, if you are planning to purchase a new policy, you must evaluate the features of the insurance policy offered under Option 1 and Option 2. You must check the portability option, waiting period for various ailments, capping on hospitalization expenses, etc.
If you find it difficult to pay the premium on your health policy, go for the EMI facility using standing instruction on your credit card. Suppose you don’t have an insurance policy already and can’t afford to pay the premium for one year, you may explore both the options i.e., facility to buy health insurance with or without a credit card. Do read the fine print carefully before you opt for EMIs to avoid any rude shocks later as the concept is still new.
Amid the Covid-19 pandemic, it has become crucial to have a health insurance policy for everyone. The rising cost of healthcare also necessitates purchasing insurance. The current EMI facility will make having an insurance policy affordable for people who want to go for a higher cover.
The author is CEO, BankBazaar.com, India’s leading online marketplace for loans and credit cards.