Life Insurance vs Health Insurance: Understanding the Difference

  • Author :
  • TATA AIG Team
  • Published on :
  • 19/10/2021

Planning and preparing for the uncertainties you may have to face in the future is a prudent decision. The sooner you decide in life, the better placed you shall be for dealing with the various curveballs that life throws at you. One of the simplest approaches to achieve the goal mentioned above is purchasing suitable life insurance and health insurance policies.

What is Health Insurance?

A health insurance policy is an agreement between an insurance company and a policyholder that offers financial protection to the latter against the expenses arising out of health-related concerns. In addition, a medical insurance plan serves as a protective cushion for you and your family in the event of accidents, illnesses, and injuries.

With the advent of technology, it is possible to assess, select, and purchase health insurance online. As a result, you can buy health insurance online and financially safeguard yourself against the adverse impact of any event on your health. In addition, it is possible to add the required features to your medical insurance plan and ensure adequate coverage.

You can buy a health insurance policy in India at as low as ₹450 per month, although the actual cost of the policy would depend on several factors, including your age, medical history, and the sum assured under the policy.

At Tata AIG, we have a diverse range of medical insurance plans that have been designed to keep your health in mind. You can visit our TATA AIG website and peruse our health insurance policies to find the most suitable Tata AIG medical insurance plan for yourself.

Types of Health Insurance Policies

There are three major 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. At Tata AIG, we have an excellent range of individual health insurance policies.

  • 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: Designed for senior citizens, that is, individuals who are 60 years of age or older, a Senior Citizen Health Insurance policy is a specialised medical insurance plan. The plan mentioned above caters to the unique challenges of ageing, including various illnesses and medical conditions. Health insurance for senior citizens is a good plan that helps policyholders handle their health-related issues in a financially secure way.

  • 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.

What is Life Insurance ?

A life insurance policy is an agreement between an insurance company and a policyholder that financially safeguards the latter and their family in the event of their passing. Over time, life insurance policies have evolved to include a wide gamut of features, so much so that some variants of life insurance plans now comprise an element of investment and guaranteed returns.

Types of Life Insurance Policies

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 a life cover.

  • Retirement Plans v: 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.

Differences Between Life Insurance and Health Insurance

There are several basic differences between life insurance and health insurance. The below table sheds light on the major life insurance and health insurance differences:

Sr No Parameters Life Insurance Health Insurance
1 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 medical expenditure of the policyholder.
2 Scope Life insurance policies are much wider in scope as compared to health insurance plans since they provide life coverage that sometimes even includes health-based coverage. Health Insurance policies are narrower in scope in comparison with life insurance policies since they do not offer life coverage.
3 Benefits The benefits of a life insurance policy include a sum assured as the death benefit for the nominee of the policyholder. 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.
4 Term Life insurance policies are usually long-term plans, with coverage up to even 100 years of age. Health insurance plans are usually for the short term and for the fulfilment of specific medical needs or expenses.
5 Survival benefits Some types of life insurance policies carry a survival benefit for the maturity of the policy. Health insurance plans carry no survival benefit; they only cater to the medical expenses specified under the policy.
6 Purpose The major purpose of a life insurance policy is to extend financial protection to the insured and their family against any eventualities, including the insured's death. A health insurance plan has the primary purpose of protecting the insured or group of insured individuals against general or specific health-related expenses as stated under the policy.
7 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.
8 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 death of the insured 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.
9 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.

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