Life Insurance Vs Health Insurance – Know the Difference

What is Life Insurance?

Life insurance is a contract between an individual and an insurance company where the insurer provides a lump sum payment to the nominee in exchange for regular premiums if the insured passes away during the policy term. The lump sum amount paid by the insurance company, known as sum assured or death benefit, can help your family cover essential expenses and maintain financial stability in your absence.

What is Health Insurance?

Health insurance, also known as medical insurance, provides financial protection to the insured against planned and emergency medical expenses, including the cost of hospitalisation, OPD treatments, day care treatments, maternity expenses and modern treatments, depending on the policy chosen. By paying a regular premium, you can get your medical expenses covered up to the sum insured limit, ensuring timely and quality healthcare without worrying about exhausting your savings.

Difference Between Life Insurance and Health Insurance

Take a look at some of the key differences between life insurance and health insurance:

Why Should You Buy a Life Insurance Policy?

Here are some of the reasons why you should buy a life insurance policy:

• Financial Security- A life insurance policy provides long-term financial protection to your family in case of unfortunate events like death or disability. It ensures your loved ones have the necessary financial support even if you are not around.
• Peace of Mind- A life insurance policy ensures that you and your family are financially protected against uncertainties, giving you peace of mind about the future.
• Death Benefit- In the event of your unforeseen demise, the nominee/legal heir receives a death benefit, helping your family maintain financial stability.
• Survival Benefit- Some life insurance policies offer a survival benefit under which you receive a refund of your premiums, minus taxes and stamp duty, if you survive the policy tenure.
• Retirement Planning- Some life insurance policies provide pension and annuity benefits, helping you secure a steady income after retirement.
• Flexible Premium Payment Options- Life insurance plans provide flexible premium payment options, allowing you to choose how you want to pay the premiums, i.e. monthly, quarterly, half-yearly, yearly, based on your financial convenience.
• Tax Benefits- Life insurance premiums qualify for tax deductions under Section 80C of the Income Tax Act, 1961. Additionally, the payout received is tax-free under Section 10(10D) of the same Act.
• Loan Facility- Certain life insurance plans allow you to take a loan against your policy, offering financial support during emergencies without depleting your hard-earned savings.

Why Should You Buy a Health Insurance Policy?

Check out some of the reasons why you must purchase a health insurance policy:

• Financial Security- Medical emergencies can happen unexpectedly, and treatment costs can be overwhelming. A health insurance policy ensures you are financially prepared to cover your medical bills without exhausting your funds.
• Protection from Rising Healthcare Costs- Medical costs are rising every year, making them inaccessible for many people. A health policy protects you from these inflating prices by covering your medical expenses up to the sum insured limit. In fact, many plans annually increase your sum insured as per the inflation rate.
• Access to Quality Healthcare- A mediclaim insurance plan enables you to receive quality medical care from reputed hospitals without worrying about paying for the expenses.
• Support for Critical Illnesses- Chronic and life-threatening illnesses like cancer, heart disease, and kidney failure require expensive and ongoing medical treatments. Critical illness insurance plans cover these illnesses, providing financial support for costly treatments.
• Cashless Treatment- Under your mediclaim policy, you can avail of cashless treatment at the hospital of your choice without paying upfront with the cashless everywhere facility. Instead, your insurer will pay the medical bills directly to the hospital.
• Protects Your Savings- Health insurance ensures that your hard-earned savings remain intact while the insurance company takes care of your medical expenses.
• Tax Benefits- Under Section 80D of the Income Tax Act, 1961, you can claim tax deductions on the premium paid for a health insurance policy. This helps you save money while securing your medicare needs.
• Peace of Mind- Knowing that your medical expenses are covered brings peace of mind. This allows you to focus on your recovery and treatment without worrying about arranging funds for hefty hospital bills.

Life Insurance Vs Health Insurance – What Should You Buy?

Life insurance and health insurance serve entirely different purposes and are essential in their own way. Life insurance offers financial security to your family in case of your untimely demise by providing a lump sum amount, which can help your family manage day-to-day expenses and secure their future. Health insurance, on the other hand, helps you pay for medical expenses, whether for a routine check-up, a sudden illness, or a planned surgery. It lets you focus on your recovery instead of worrying about paying medical bills.

Since both life and health insurance provide financial protection in different situations, it is advisable to have both rather than choosing one over the other.