Securing a financial safety net for you and your family is the best feeling. Insurance is one such product available in the market that can help you arrange a financial safety net. But when buying insurance products, there is a lot of confusion. Which option is best to opt for? Which category of investment is most suitable to ensure the future? People usually split between life insurance and health insurance. Both provide a separate set of advantages. Now, it is your decision which one to opt for? – Life insurance, where you cover your family with financial security in your absence; on the other hand, there is health insurance, which provides a solid financial backup to cover the medical cost that may incur on your or any family member’s health ailment. Let’s have a detailed discussion on both to clarify the difference between life insurance and health insurance.
Purpose of life insurance
Life insurance’s primary purpose is to provide the policyholder with a life cover. It ensures the policyholder that his dependent will be financially safe and secure in his absence. In case of any eventuality, the insurance policy will provide substitute income to his family members, which allows them to lead a normal routine life.
The best part about a life insurance policy is that no tax is deducted from the beneficiary’s income. Life insurance covers the entire financial needs and future plans of the policyholder’s family.
Types of life insurance
Whole life insurance:
Whole life insurance comes with fixed premium payouts. Under this, the beneficiary is provided a tax-free, fixed sum assured. It is cost-effective insurance and also bears less risk when we compare it to universal life insurance.
One can opt to acquire a loan against a whole-life policy.
Universal life insurance:
Universal life insurance is also known as an investment policy, but it provides a death benefit. It offers flexible premium payouts, and a part of it is invested to enhance cash value to the sum assured. Unlike whole life insurance, universal life insurance is expensive and offers higher returns; simultaneously, it possesses potential risk.
Purpose of health insurance
As the name suggests, health insurance aims to cover the medical cost of the policyholder or may include the family members included in the policy terms. Here the policyholder pays the fixed premium. The insurance company reimburses the medical and hospitalization expenses after you pay the bills.
Types of health insurance
Individual health insurance –
Individual health insurance is for an individual that is the policyholder. It covers all the illness and medical emergency expenses that may occur during life. It also includes medical costs, OPD expenses, accidents, and other critical expenses based on the terms of the policy.
Family floater health insurance –
Under this type of health insurance, the policyholder pays a premium to cover health protection for all family members. It covers the hospitalization, illness, accidents, and all medical emergency expenses to the policyholder and his family members for a lifetime.
Senior citizen health insurance – These policies are available for those who are 60+. As medical expenses become complex at this age, the family health insurance does not cover them. These plans cover the cost of all the premiums paid for the diseases that occur with aging.
Difference between life and health insurance
Life insurance and health insurance are both crucial factors in a financial portfolio. But both fulfill separate purposes. The above description makes it clear that life insurance ensures financial support to the beneficiary in case of the policyholder’s death. At the same time, health insurance provides monetary assistance to settle the hospital bills of the policyholder. Both plans have their set of benefits, and one should keep both in the financial portfolio.
Here is a clearer picture of the difference between life insurance and health insurance in tabular form –
| Feature | Life insurance | Health insurance |
| Reason to invest | Financial security of the family in case of policy holder’s death | To deal with skyrocketing medical expenses that may arise in life and disturb your budget and plans. |
| Core benefit | Term plan, Savings, Child education/marriage, retirement plan, etc. | All the medical and treatment expenses are covered subject to the maximum coverage amount and the conditions of the policy. |
| Term | It is a long-term plan | It is a short-term plan |
| Tenure | Usually, it is for a fixed tenure | There is no fixed tenure |
| Protection | It protects the nominee/beneficiary/ family | It covers the policyholder and his family |
| Survival or death benefit | It provides the survival and death benefits at the end of the term but it depends upon the policy. | It does not offer any survival and death benefit and cater the exiting medical needs. |
| Tax benefit | It is exempted under section 80C, section 10(10D) of the Income Tax Act | It does not offer any survival and death benefit and cater to the exiting medical needs. |
| Types of plans | It is exempted under section 80C of the Income Tax act. | Critical illness cover, Mediclaim etc. |
The above report about the difference between life insurance and health insurance in tabular form gives precise information to understand the potential of both insurances. Though life insurance and health insurance are distinct factors of the portfolio both have their range of benefits, and both play a crucial role; thus, one needs to make an informed decision by considering and analyzing your requirements.
Both insurances work as protection shields, and it is better to safeguard you and your loved ones’ lives. Thus, it is advisable to understand the difference between life and health insurance and make quick decisions by choosing adequate coverage in the policies.
