Difference Between Life Insurance and Health Insurance

Having a financial safety net in these uncertain times is crucial for individuals and their families. This is why most people prefer to purchase life insurance and health insurance to secure themselves against unforeseen emergencies.

Both health and life insurance lower the financial burdens of individuals and families in the event of hardship. However, people often ask about the difference between life and health insurance. Knowing the difference and individual importance can help us make an informed decision.

What is the Difference Between Health Insurance and Life Insurance

Parameters	Life Insurance	Health Insurance
Meaning	Life insurance is a type of insurance that offers life coverage to the policyholder.	Health Insurance is a type of policy that covers the policyholder's medical expenses.
Scope	Life insurance policies are much wider in scope than health insurance plans since they provide life coverage that sometimes even includes health-based coverage.	Health Insurance policies are narrower in scope than life insurance policies because they do not offer life coverage.
Benefits	The benefits of a life insurance policy include a sum assured as the death benefit for the policyholder's nominee. In some types of life insurance policies, there are maturity benefits and guaranteed returns.	The benefits of a health insurance plan comprise financial assistance to cover the expenses pertaining to medical treatment, hospitalisation and, in specific policies, surgeries.
Term	Life insurance policies are usually long-term plans, with coverage up to 100 years of age.	Health insurance plans are usually short-term and for the fulfillment of specific medical needs or expenses.
Survival benefits	Some types of life insurance policies carry a survival benefit until the policy matures. .	Health insurance plans carry no survival benefit; they only cover the medical expenses specified under the policy.
Return on investment	Certain life insurance policies provide the policyholder with the assured return on the premium paid, such as bonuses, guaranteed additions, etc., during the policy term.	There is no return on investment associated with a health insurance plan. The policyholder is merely eligible for a reimbursement of their medical expenses, subject to the ceiling mentioned under the policy.
Nature of tenure	Life insurance policies usually have a fixed term, following which the policy ends. However, if the insured dies within the policy term, the policy ends before maturity. Some life insurance policies carry on after the insured's death if those terms are specifically stated in the policy.	Health insurance plans are usually renewed on an annual basis following a review of the insured's medical situation and medical needs.
No Claim Bonus (NCB)	Life insurance policies do not carry any No Claim Bonus since the only claim permissible is a death claim. However, in life insurance policies with a critical illness rider, there are claims for critical illness expenses. Nevertheless, there is no no-claim bonus.	Some health insurance plans have a No Claim Bonus clause that rewards the policyholder for not making any claims on the policy by offering discounts on the renewal premium or an increase in the sum assured upon renewal.

Also Read: Difference between Term Insurance and Health Insurance

What is Health Insurance?

A health insurance plan is a type of insurance that offers medical coverage to policyholders in the event of medical emergencies. In exchange for medical coverage, policyholders pay a premium to the insurance provider.

The health policy covers various planned and emergency medical expenses, including inpatient treatment, pre and post-hospitalisation, domiciliary treatment, and more. The coverage of a health insurance plan may vary depending on the plan you have chosen.

Purpose of Health Insurance Plan

The purpose of the best health insurance policy is to provide policyholders with access to quality healthcare. With the health insurance plan on their side, policyholders do not have to worry about hefty medical bills.

The policy aims to cover the costs of medical treatment related to illnesses or injuries within the limits of the insured amount.

Also Read: How Health Insurance Works?

Types of Health Insurance Policy

There are different types of health insurance policies, which have been discussed below.

Individual Health Insurance

As its name suggests, an Individual health insurance policy is a medical insurance plan for an individual. It is possible to purchase individual medical insurance plans for all the members of your family.

Family Health Insurance

A family health insurance policy enables you to provide medical coverage to multiple family members within the same plan. With a high sum assured, you can ensure adequate coverage for your entire family.

Senior Citizen Health Insurance

A Senior Citizen Health Insurance policy is a specialised medical insurance plan designed for individuals 60 years of age or older. The plan mentioned above caters to the unique challenges of ageing, including various illnesses and medical conditions.

Super Top-Up Health Insurance

A Super Top-Up Health Insurance Plan provides you coverage in addition to your regular health insurance plan. With this plan, you can include several additional features to your medical insurance plan, including lifelong policy renewal and an optional global medical cover.

Critical Illness Health Insurance Plan

A critical illness health insurance plan offers coverage against critical illnesses and diseases such as cancer, kidney failure, etc. Upon diagnosis, the plan helps cover the cost of medical treatment. It is also available as a rider with various base health insurance plans.

Also Read: What Is Health Insurance? Definition & Types

Benefits of Health Insurance Policy

There are various benefits of purchasing a health insurance plan, such as:

Financial Protection

One of the essential benefits of a health insurance plan is that it offers financial protection against unexpected medical costs. The high medical treatment cost can easily derail your monthly budgeting if you do not have a health insurance policy. With a health insurance policy, you can get medical coverage without breaking the bank.

Quality Healthcare

Another key advantage of the health insurance plan is that it offers access to quality healthcare in the event of a crisis. When the insurance provider incurs medical insurance bills, the policyholder does not think twice before getting quality treatment.

With health insurance as a safety net, policyholders focus on getting better without worrying about hefty medical bills.

Customised Medical Coverage

Another benefit of purchasing a medical insurance plan is access to tailored coverage based on your health requirements. Many insurance providers offer customised plans.

Furthermore, insurance providers also offer various add-ons that individuals can add to their plans to enhance their health coverage.

Tax Benefits

Individuals and families who purchase health insurance policies also get tax benefits under Section 80D of the Income Tax Act. As per the act, you can claim the deduction of ₹25,000 for a health insurance premium at the time of filing an income tax return.

However, individuals above 50 years of age can claim deductions of ₹50,000 on health insurance premiums paid. Moreover, a ₹5000 extra deduction is allowed on preventive health checkups.

When to Buy a Health Insurance Policy?

If you have a family medical history, then consider buying a health insurance plan.

If your health is deteriorating, then it is best to buy a health policy.

If you have dependent family members or are thinking of starting a family, buying a health insurance plan is prudent.

Also Read: Compare Health Insurance

What is Life Insurance?

Life insurance is a type of insurance coverage that offers financial compensation to the family in the event of a policyholder's demise.

It is a contract between the policyholder and the insurance company in which the insurance company pays the predefined sum insured to the listed nominee in the event of the policyholder's sudden demise.

The sum insured by the life insurance policy may vary from insurance provider to provider and the type of policy chosen.

Purpose of Life Insurance Plan

The purpose of a life insurance plan is to offer financial security to the policyholder's dependent family members in his absence. The main objective behind purchasing life insurance coverage is to secure the policyholder's dependent members or nominees in the event something happens to the policyholder.

If the policyholder is the sole breadwinner in the family, then the compensation amount will help in offering some security to the members.

Types of Life Insurance Policy

Here are the major types of life insurance policies.

Term Insurance Plans

A term insurance policy is a financial product that offers life insurance coverage to the policyholder for a fixed term against a specified premium payment. This type of policy is considered a pure life insurance policy and is usually less expensive than other life insurance policies.

Unit Linked Insurance Plans (ULIPs)

A ULIP is a product that combines the benefits of insurance and investment by allowing you to allocate parts of your premium towards a life cover and a market-linked ULIP fund or group of funds. ULIPs are an excellent way for small investors to invest in the stock market with a fund with a degree of risk in alignment with their risk appetite.

Endowment Plans

An Endowment Plan is a policy that assures the payment of a predetermined sum to the insured at the end of the policy term.

This type of policy enables you to save gradually and systematically and receive a lump-sum benefit or a regular income stream once the policy matures. In addition to the element of saving, an endowment plan also provides you with life insurance.

Retirement Plans

With insurance-based retirement plans, you can build a substantial corpus for your post-retirement life and be assured of a regular stream of income. You can opt for a lump-sum payout, a regular income or a combination of the two.

Benefits of Life Insurance Plan

Here are some of the common benefits of a life insurance plan:

Death Benefits

One of the reasons why most individuals purchase life insurance plans is because of the death benefits. The insurance policy provides the predetermined sum insured to the family of the policyholder in the event of the loss of the policyholder’s life.

Debt Repayment

The life insurance policy also helps pay various debts, such as home mortgages, car loans and study loans. The policy amount helps cover these loans and protect family members from being burdened with debt in the event of the policyholder's death.

Income Replacement

Another benefit of life insurance is that it ensures income replacement in the event of the policyholder’s demise.

If such support is rendered, it can assist beneficiaries in maintaining their quality of life by helping provide for necessary costs like education costs, house rent and everyday survival expenses if the policyholder is the sole breadwinner in the family.

Riders Benefits

Most life insurance plans also come with rider benefits like critical illness coverage, premium payment, etc. These riders enhance the core policy by providing additional protection tailored to specific needs.

For instance, a critical illness rider offers a lump-sum payout upon diagnosis of a covered illness, helping to manage medical costs and loss of income during recovery.

When to Buy a Life Insurance Policy?

If you are the only breadwinner in the family, then purchasing a life insurance policy is a wise decision.

Furthermore, if you have taken out substantial loans, such as house loans, education loans, etc., then it is best to have a life insurance plan.

If you are starting a family or have young children, a life insurance plan is a wise decision to secure your future education and other needs.

Factors to Consider While Choosing Health vs Life Insurance

The difference between life insurance and health insurance is major. Both insurance plans serve different purposes and are crucial from a financial planning perspective. Here are some factors that can help you choose health and life insurance plans.

Understand Your Needs

Whether choosing life insurance vs health insurance, the first thing is understanding your insurance needs.

In the case of a health insurance plan, you need to understand your health requirements, family medical history, and other factors. For life insurance plans, you need to assess your financial conditions, loan amount, and more. Knowing your requirements will help you decide on a plan that aligns with your life goals.

Compare Different Plans

Once you have decided on health vs. life insurance plans, the next step is to compare different insurance plans from different providers. Comparing different insurance plans will help you understand the policy features and premiums that fit your criteria.

Policy Features and Benefits

After selecting the type of insurance and comparing different plans, the next step is to understand the key features and benefits of the policy you are considering. Each insurance plan offers unique offerings that can enhance the overall value of your coverage.

Check Policy Exclusions

Before selecting life insurance and health insurance plans, it is essential to know about the policy exclusions as well. The policy exclusions help you understand what is not covered under the plan, which can help you save on out-of-pocket expenses.

Check Claim Settlement Ratio

The claim settlement ratio is another important aspect that you must keep in mind while choosing life and health insurance.

This ratio represents the percentage of claims that the insurance provider was able to settle successfully in a year divided by the total number of claims received. A higher claim settlement ratio means the provider's reliability and efficiency in settling claims in times of emergencies.

Conclusion

Understanding life insurance and health insurance differences helps individuals make better financial investments. Both offer a crucial safety net to individuals and their families in their hour of need.

The best health insurance policy helps you cover medical expenditures. It provides you with timely healthcare, whereas life insurance provides your loved ones with financial support in case something unfortunate happens to you. Selecting the appropriate plan according to your demands can provide security and financial stability for the long haul.

TATA AIG offers various health insurance plans that are customised to your healthcare needs. For instance, our family health insurance plans offer health coverage to individuals and their insured family members under a single plan. The sum insured by the health policy is distributed among all family members.

This health insurance policy comes with many benefits, such as AYUSH benefits, accidental death benefits, a wellness program, and much more. You can easily buy a health insurance policy with minimal paperwork and zero hassles. Secure yourself and your family with our health insurance plans now.

Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.