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Difference between Term Insurance and Health Insurance

  • Author :
  • TATA AIG Team
  • Published on :
  • 18/07/2022

Family is both priceless and irreplaceable. Strong familial bonds help double the joys and halve the sorrows of the world. Considering this, every individual would like to ensure the happiness and security of their families regardless of whether they are around. Fortunately, with the appropriate insurance products, this objective can be rightly served.

However, because of the suite of insurance offerings available in the market today, individuals may feel overwhelmed, particularly when they don’t know the difference between health insurance and term insurance. The term insurance vs health insurance debate is often a hot topic amongst young insurance buyers who don’t know which way to go in the early stage of having to make a choice.

Understanding the difference between term insurance and health insurance can help carefully analyse personal needs and thereby make an informed purchase.

Let us get into the details of term life insurance vs health insurance.

What is Term Insurance?

Term insurance answer a pertinent question that several individuals casually dismiss – particularly in the early stage of their careers. The unpredictability of life cannot be denied, and much as we would like to focus on the bright and beautiful, every earning individual must consider what would happen to their family in their absence.

Although the emotional loss is too heavy to bear, term insurance can promise the financial independence of your family when you are not around to look after their routine needs. An initially alarming thought of not being around transforms into a calming one knowing that family needs are going to be well addressed with an investment in comprehensive term insurance.

What is Health Insurance?

While term insurance secures an unpredictable future, a health insurance policy from Tata AIG offers benefits that cover the growing medical expenses. Our changing lifestyles have impacted our health. Bidding goodbye to outside food may be difficult, and at the same time, soaring hospital expenses can burn a sizable hole in your pocket. How then do you save for a rainy day?

A health insurance policy is the answer to all your health-related woes. Usually, for most of us, after the salary pays all the bills, there is little left to add to an “in case of an emergency fund.” While illnesses are unexpected (and uninvited) guests with the help of a health insurance policy, at least the worry of hospitalisation and medical expenses are addressed. Depending on the specific needs of each policy buyer, there are different kinds of health insurance plans – each with its distinct benefits.

For instance, a family health insurance policy covers multiple family members under a single premium cover. You can even fortify your health insurance cover with add-ons such as critical illness insurance. Critical illness insurance covers a big health emergency such as heart attack or stroke, even cancer, and the only thing standing between you and your financial ruin is this fortified health cover.

Difference Between Health Insurance and Term Insurance

While both term and health insurance are important to secure your financial future, a comparative analysis of health insurance vs term insurance can put things into better perspective. For an informed insurance purchase, it is important to compare the benefits of health insurance against that of term insurance and thereby analyse personal financial needs for the most suitable policy. Without further ado, let us understand the difference between term life insurance vs health insurance.

Term Insurance Policy Health Insurance Policy
Term insurance is a financial cover for the family of the insured in case of the untimely demise of the policyholder. The benefits of a health insurance plan can be reaped in case of any medical expenses incurred by the policyholder due to a medical emergency.
Term insurance is a one-time payout (unless chosen otherwise) in the event that the policyholder is no more. During the policy term, unlimited claims can be made basis the scope of the coverage that is pre-defined in the policy.
It is the cheapest insurance plan with the lowest amount of premium charged. The premium charged for a health insurance cover is relatively higher; however, an early buy ensures a lower premium.
There are no maturity advantages with a term insurance plan. The benefits are only provided to the beneficiaries if the insured member passes away. If the policyholder survives the term, the insurance cover is terminated. Most insurance providers have the no-claim maturity bonus, which leads to a lower premium in the following year of the policy.
In the technical sense, the term plan acts more like insurance and less as an investment as there are no survival benefits unless those have been opted for, wherein the premiums paid are returned to the insurer after the end of the policy cover. Contrarily, a health insurance policy acts as an investment that comes to your rescue when you need it most by reimbursing the hospitalisation expenses. With varied add-ons, the cover can be further fortified to cover bills such as that of an ambulance.

Now that the difference between term insurance and health insurance is clearly laid out, it becomes easier to choose from health insurance vs term insurance cover (although ideally, both these are important, particularly for individuals with aged parents). However, to get a bang for your buck with either of these policies, it is recommended to get both term and health insurance plans in the early stage of life as the premiums increase as you grow older.

Types of Insurance Policies

The insurance requirements of every individual are different, and insurance providers have created unique options to address each distinct need.

  • Types of Health Insurance

Individual Health Insurance: These plans cover one insured member. If you wish to buy a single insurance plan for each of your family members, you can choose to do that as well.

Family Health Insurance: In this, multiple family members can be covered through a single coverage under the same health plan.

Critical Illness Insurance: A basic health cover does not usually provide financial protection against critical illnesses. With these plans, overbearing illnesses such as heart stroke, cancer, etc., are taken care of. However, before investing in critical illness insurance, one must go through the list of illnesses covered under this plan to avoid any unpleasant surprises in times of trial.

Accident Insurance: As the name suggests, this insurance covers expenses incurred from accidents such as permanent disability or death, wherein the beneficiary receives the sum assured to take care of the financial needs.
COVID Health Insurance: In the wake of recent events, insurance providers have started to cover COVID-19-related medical expenses.

  • Types of Term Insurance

Level Term Insurance: With this plan, the premium payable remains the same throughout the policy term Return of Premium Insurance: It offers survival benefits wherein the premiums paid by the policyholder are returned after the end of the policy term

Increasing Term Insurance: With this plan, the death benefit increases year-on-year with a subsequent increase in the premiums payable by the insured member

Decreasing Term Insurance: The death benefit decreases with each passing year, and the premium amount remains constant


To conclude when choosing between term insurance vs health insurance every investor must carefully analyse their financial needs. Insurers must observe the lifestyle of their family and their financial needs, which should subsequently be adjusted against the rising inflation to ensure wholesome protection and financial independence.

Disclaimer / TnC

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

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