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Difference between Life Insurance and Health Insurance

Life insurance and health insurance are two different types of insurance. But what exactly is the difference between these two? Life insurance is for people who want to protect themselves against the financial consequences of death, while health insurance is for people who want to protect themselves from the financial consequences of an accident or illness.

Life Insurance vs Health Insurance

What is Life Insurance?

Life insurance is a type of insurance policy that provides coverage for the insured's life. Life insurance policies are designed to replace income in the event of death. Life insurance is something that many people don't think they need until they start thinking about the future. With life insurance, an individual's family is taken care of in case of a loss due to death or illness. It ensures a healthy and happy family by providing financial support in the event of death or a catastrophic event.

  • Term Insurance
  • Whole Life Insurance
  • Endowment Insurance
  • Unit Linked Insurance
  • Money Back Plans
  • Child Life Insurance Plans
  • Pension Plans

Benefits of Life Insurance

  • Financial Security: A life insurance policy helps to minimize the risk of financial difficulties which would be faced by the families in case of the sudden death of the policyholder. According to the life insurance definition, the insurance provider agrees to pay the nominee or beneficiary the pre-defined sum assured. As a result, even in the policyholder’s absence, his family stays protected.
  • Long Term Savings: Apart from life insurance cover some life insurance plans also offer you the opportunity to create wealth. If one wants to make long-term investments, it’s important to think about life insurance meaning. Such insurance plans help you make systematic savings and create wealth that can be used for your future goals.
  • Tax Savings: Life insurance offers tax dual benefits under prevailing laws as per Income Tax Act, 1961. The life insurance premium paid can be availed as a tax deduction under section 80C. You can avail of a deduction of up to Rs.1.5 lakh under Section 80C of the Income Tax Act. The maturity insurance plans may be completely tax-free. This tax benefit is under Section 10(10D) of the Income Tax Act.
  • Save Money: The life insurance policy gives financial security to the family of the policyholder. The premium paid by the customer is depending on age, life expectancy, health, and gender. Life insurance gives you the ability to stick at low premium rates while you’re young. If you buy the same policy when you are older, you will be paying a much higher premium compared to if you bought the same plan when you were younger.

What is Health Insurance?

Health insurance is a type of insurance that can be used to pay for health care services and related costs. Health insurance provides financial security that covers medical expenses incurred by an individual or a family. Health insurance is a long-term contract between the customer and the insurance company. The people who have health insurance can get health insurance claims from the insurance company in case of hospitalization due to accident or illness and they will take care of medical expenses charged by the hospital.

Types of Health Insurance Policies

  • Individual Health Insurance
  • Family Health Insurance
  • Critical Illness Health Insurance
  • Senior Citizen Health Insurance
  • Top Up Health Insurance
  • Personal Accident Insurance
  • Mediclaim Insurance
  • Group Health Insurance
  • Disease-Specific Health Insurance

Benefits of Health Insurance

  • Financial Security: Considering the rising medical expenses in India, it becomes imperative to get a reliable health insurance policy on time. The policy not only offers you wide coverage but also protects you from hospitalization expenses in case of emergency even during inflation. It not only keeps you stress-free but also takes care of your health.
  • Cashless Treatment: Generally insurance companies have tie-ups with hospitals, known as network hospitals that offer cashless treatment to the insured in case of hospitalization. These hospitals reimburse the expenses related to treatment availed by the insured. This means, you can avail of treatment at these hospitals without paying anything for the medical expenses incurred, and the insurance company will reimburse you for the same later when you make a claim. Note that the claim will be approved if it is made by the terms and conditions mentioned under the policy.
  • Lifetime Renewability Benefit: Lifetime renewability benefit allows the policyholder to renew their health insurance policy without any age limit or upper restriction. Especially for senior citizens and parents, the lifetime renewability benefit takes off the financial pressure in case of a medical emergency. The Insurance Regulatory and Development Authority of India (IRDAI) has given guidelines to the insurance providers to offer this benefit under the health insurance plans that they offer.
  • No Claim Bonus: Insurance companies offer No Claim Bonus (NCB) as a reward to the policyholders for not making any claim during the policy year. Also known as a cumulative bonus, the No Claim Bonus applies to both individual health insurance plans as well as family floater health insurance plans. However, note that there is a limit of coverage that you can extend through the No Claim Bonus.
  • Tax Benefits: The government promotes health insurance by offering tax deductions on the premium paid for them, under Section 80D of the Income Tax Act, 1961.
  • Portability Benefits: Health insurance portability allows the policyholders to transfer their existing health insurance policy to a new health insurance provider. It safeguards customers from being taken for granted by the insurance companies, thereby giving them flexibility and offering them better options in case they are not satisfied with their existing health insurance plans.

Difference between Life Insurance and Health Insurance

Now that you have a basic understanding of the concept, let us take a look at the specific differences between life insurance and health insurance. Here are some of the key parameters based on which they differ from each other:

Life Insurance vs Health Insurance:

ParameterLife InsuranceHealth Insurance
CoverageIndividual, FloaterIndividual, Floater
Tenure FixedNon-Fixed
ProtectionProtects against the risk of death.Protects against the risk of hospitalization and medical expenses.e
Core benefitA Sum Assured amount (Death Benefit) is paid to the nominee of insured.Covers the treatment cost for illnesses/ health conditions subject to a maximum coverage amount and other conditions.
TermLong Term Plan Short Term Plan
Tax BenefitsUnder Section 80C, 10(10D) of the Income Tax Act.Under Section 80D of the Income Tax Act.
Additional Benefits Maturity Benefit, Surrender Benefit, Loyalty Additions, etc.No Claim Bonus can be added
PremiumThe premiums are both fixed and flexible depending upon the type of policy.The premiums are fixed
Premium Payment ModePeriodic intervals or single lump sum amount.lump-sum amount.
BenefitsBoth survival and death benefits at the end of the insurance term.No survival and death benefits
Cost High compared to the health insurance policyLow compared to life insurance

Conclusion:

Both life insurance and health insurance are required to secure our loved ones and both are needed to comprehensively cover all the aspects of life. Insurance is an effective way to manage risk factors and provides peace of mind. Different insurance providers offer different types of benefits along with tax benefits under specific terms and conditions. Before buying an insurance policy, you must have a clear understanding of what you want to do. When you are looking for the best insurance plan, it is important to know what your options are. That is why comparing insurance plans can be a great way to find the right one for you. Online insurance portals are the best platforms to get the best insurance plans. PolicyBachat is an online insurance web aggregator which helps in selecting insurance policies online for its customers based on the customer’s requirements. Please visit our portal to compare insurance policies from top insurance companies and select the best insurance policy which fits all your requirements.

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