Dilemma: Life insurance or Health insurance … what do I choose?

Life Insurance over Health Insurance

Life insurance is designed in a way that provides financial protection to one’s family in the event of his/her sudden death. It pays a lump sum amount, which is pre-decided. Here’s why you should go for Life over health.

• Financial assistance to cover loss of income
• Safeguard to your returement
• Option of investment
• Alleviate saving
• Source of tax saving

Financial Assistance to Cover Loss of Income: The sudden demise of the sole earner of a family leads to loss of income and hence, marks a considerable financial strain on their survival. If the insured has a life insurance plan, his/her family member(s) can ask for a death claim to be paid by the insurance company. This much-needed financial assistance helps the family to survive or to start afresh.

Safeguard Your Retirement: Life insurance companies have a provision for pension plans, specially designed for senior citizens. As per the norms, this plan takes care of your expenses post-retirement. This plan runs on annuity payments at regular intervals. This way you can secure a much needed income for your old age.

The option of Investment: Apart from providing death coverage, life insurance also offers maturity benefits. At the maturity of the plan, the investor can avail of the money. In this way, by creating investment options, it affords a corpus in a specific period. Besides, for those who buy ULIPs (Unit Linked Insurance Plans), the premium paid can be invested in the share market. This way one can enjoy market-linked returns as well, with the life cover.

Alleviate Savings: Paying premium for your life insurance plan ensures you save some amount of your income. Whether it is out of compulsion or intentional, this inculcates the practice of saving. This habit helps you earn a lump sum corpus in the long run, which is, by any means, bigger than what you invested as savings.

Source of Tax Saving: One can save on tax with a life insurance policy. Paying tax is the only legitimate way to prove your income. Every individual, be it salaried or business person, is liable to pay tax annually, if he/she comes under the tax slab designed by Income Tax Department of India. Since tax is a necessary burden for all, the amount paid as premium of up to 1.5 lakh, is exempted from the tax deduction. This provides an avenue for tax-free investment.

Health Insurance over Life Insurance

Health insurance takes care of your unplanned expenses that may arise due to a medical contingency, that leads to hospitalisation. It protects the insured by providing expenses such as hospital bills, ambulance fee, surgery, doctor’s fees and so on. Following are few pointers in favour of a health insurance plan over term insurance.

• Medical emergencies are usual
• When inflation touches healthcare sector
• In is more than hospitalisation cover

Medical Emergencies Are Usual: Health emergencies are common these days. With the hustle and bustle of life, we often tend to ignore our health and welcome risky diseases. Medical emergencies lead to hefty hospital bills that may adversely affect your savings. So, having health insurance is a must these days. When you know your financial expenses will be taken care, you don’t compromise the quality of healthcare.

When Inflation Touches Healthcare Sector: Medical expenses are sky-rocketing. The increasing trend in healthcare expenses binds us to have an adequate health plan that covers you against medical inflation.

It is More than Hospitalisation Cover: Why do you need health insurance? Is it is more than just hospitalisation coverage? In India, health insurers cover you starting from the medical expenses including room rent, doctor’s bill, surgery, ambulance, maternity expenses, Ayurvedic treatments, prescription costs, etc. This is just the tip of the iceberg. It provides for enough coverage that fulfils almost your overall medical needs.

Actual Time to Purchase Life and Health Insurance:

When You are in 20’s

This is an important phase of our lives as we set our aims and explore new things. At a young age, we don’t realise the importance of insurance. But it is, decidedly, the best time to kick-start your coverage. One must buy term insurance at his/her 20s to beat any unexpected contingencies. Also, investing in a medical or health plan is a wise idea now.

To give you a holistic view, let us take you through the insurance journey of Rahul. At the beginning when Rahul starts working at his first job as a young associate, considering his income, he should go for a term plan. Term plans are more affordable than other life insurance plans. Moreover, the insurance premium will also be affordable if bought at an early age.

Then, Rahul should opt for a health insurance plan considering the fact that medical expenses are higher. If his employer covers him in a group health insurance plan, that is also sufficient at this age. Women can opt for maternity cover so that the initial waiting period of 3 to 4 years is served before one needs to make a claim.

When You are in the 30’s

At this age, you have lots of responsibilities starting from parents to spouse and kids. So, ensure that you factor them in your plan accordingly. In your 20s, a term plan seems enough but as you enter your 30s, you should include a child plan. If you have children, this plan secures their future. If you have health insurance, then increase the Sum Insured or go for a family floater that includes your entire family.

If we take the above example, Rahul, when he enters 30s, should buy a child plan to add to his existing term plan. If he feels the coverage of term plan is not enough, it is the best time to increase it.

When it comes to health insurance, a Family Floater Plan will be the best option, wherein he can cover his spouse and children as well. Rahul can convert his previous health plan to a floater one and either go for an extensive cover or opt for a top-up plan as an add-on benefit cover.

When You are in the 40s

This is the age of building your life assets. Buying a term plan is necessary when you plan your financial decisions. Also, an endowment plan will help you save more and get a substantial fund at the time of maturity. One should plan his/her financial preparation for retirement from their 40s.

From this age onwards, you need to pay more attention towards your health so sticking to a family floater plan is a good option. This proves more affordable compared to the separate health policy you could buy for each family member. By adding a top-up cover you can increase the health coverage as well. These days, lifestyle diseases are common, so buying a critical illness cover has become a necessity.

So, Rahul in his 40s should include an endowment plan, a pension plan along with a Critical Illness cover into his financial portfolio.

When You are in the 50s

This is the time when you should plan your expenses focussing heavily on your retirement plan. Now, you must buy a pension plan that ensures you get a lump sum amount monthly as an income post retirement.

Your existing comprehensive health insurance plan is still your companion in need.

So, Rahul can continue his existing life and health plans. If he has been ignoring a pension plan until now, it is the high time, he buys one.

When You are in the 60s

This is the most critical phase of one’s life. Old age requires utmost attention. It is difficult to purchase a plan at this age owing to the fact that you stop earning or sometimes may be dependent on others. However, you should approach the insurance companies that target senior citizens and offer plans as per their requirements. Or you can continue with the existing term plan with a lifetime renewal facility.

There are senior citizen health insurance plans offered by various insurers, which take care of your old age-related health issues and cover the medical expenses incurred. If you already own one, consider converting this to a comprehensive health plan.

So, Rahul should continue his term and health insurance . If he feels his existing health coverage doesn’t match his requirement or if he has not bought it earlier, he can go for senior citizen health insurance plan with pre-existing illness coverage.

Wrapping Up!

Contingencies come without knocking. So the best way to make sure that you are not financially affected by a medical emergency or that family will not face a financial hardship in case of your sudden demise, is to buy life and health insurance.

Since they play an equally, important role and come with a bundle of benefits, it is up to you, how you channelize your requirement with a plan. Though buying at a young age is ideal, health or life insurance related requirement depends on which stage of your life you’re at. Every stage has a different requirement. First, analyse which phase of life you’re in and decide a plan accordingly.

Also, it makes sense to compare insurance plans online. Comparison of insurance plans enables you to make an informed decision. So, make sure you have a bucket full of options before zeroing in on something.