When paying your health insurance premium, you have multiple payment options, including cash, credit card, debit card, net banking, or cheques. However, each method comes with its own benefits and drawbacks.

Short Answer:

• Non-cash payments (credit card, debit card, net banking, UPI) are the best option because they provide tax benefits, convenience, and rewards.
• Cash payments should be avoided because they do not qualify for tax deductions and lack an electronic record.

Now, let’s break it down in detail.

1. Tax Benefits: Why Cash is NOT a Good Option

The Income Tax Act (Section 80D) allows tax deductions on health insurance premiums, but only if paid via non-cash methods.

Example:
If you pay ₹25,000 for your health insurance premium:

• Non-cash payment (Credit Card, Debit Card, Net Banking, etc.) → You get a ₹25,000 tax deduction under Section 80D.
  
• Cash Payment → No tax deduction!

Key Takeaway: Always avoid cash payments to claim tax benefits.

2. Convenience and Record-Keeping: Why Credit Card is Better

Credit Card & Digital Payments:

• Provide an instant receipt and online transaction history for future reference.
• Help track expenses and avoid misplacing proof of payment.

Cash Payments:

• Require visiting an insurer's branch physically.
• If you lose the receipt, you may face difficulties in claiming tax benefits or resolving disputes.

Key Takeaway: Go cashless for a secure and hassle-free experience.

3. Potential Fees & Interest: The Catch with Credit Cards

• Some insurers charge a convenience fee (usually 1-2%) for credit card payments.
• If you don’t pay your credit card bill on time, you’ll incur high interest (up to 40% annually), increasing your overall insurance cost.

Solution:

• Use a credit card only if you can pay the full bill on time.
• Check for hidden charges before making a credit card payment.

Key Takeaway: Use a credit card responsibly to avoid unnecessary costs.

4. Rewards & Cashback: How Credit Cards Can Save You Money

Many credit cards offer cashback, reward points, or discounts on health insurance payments.

Example:
If you pay ₹30,000 using a credit card with 2% cashback, you save ₹600 instantly!

Key Takeaway: Credit cards can help you save money if used wisely.

5. Should You Use EMI for Insurance Payments?

Some credit cards allow EMI conversion for insurance payments. This means you can split your premium into smaller monthly payments.

Good If:

• You are paying a large premium (₹50,000 or more).
• You want better cash flow management.

Not Good If:

• The EMI has high interest rates.
• There are processing fees.

Tip: Always check the total cost of EMI conversion before opting for it.

Key Takeaway: Use EMIs only if there are low or no additional charges.

Final Takeaway: Always pay via credit card, debit card, or online banking to get tax benefits, cashback, and a digital record—but avoid extra fees and interest!