Buying insurance is a paramount decision for most families and individuals in a country like India. The importance of having insurance is acknowledged due to rising inflation and other factors, which one to buy – whether term insurance or health insurance, is a debate.
Firstly, it is important to understand that both health as well as life insurance plans serve different purposes, and this is where individuals usually get confused. It must be noted that both insurance products are important to protect yourself and your loved ones as well as guard your savings.
In the below article we shall try to shed some light on the health insurance vs. life insurance debate and which one can be better for you.
What is Health Insurance?
A policy that provides financial coverage for an individual in case of a health emergency is a health insurance policy. Typically, a medical policy reduces the financial burden of an individual by covering the healthcare part by paying the treatment bills, hospitalisation bills, prescriptions, preventative treatments, etc.
What is Life Insurance?
A life insurance policy is an agreement between the insurance company and the subscriber of this plan (policyholder) that promises financial protection to the policyholder’s loved ones’ in case of the holder’s untimely demise, under certain terms and conditions. The policyholder is expected to pay periodic policy premiums in return for financial aid to their nominees. This lump-sum or monthly payment amount of money that the family or nominees receive after the policyholder’s death is the sum assured.
Comparison Between Life and Health Insurance
| Feature | Life Insurance | Health Insurance |
| Purpose | The purpose of a life insurance policy is to provide financial security to the policyholder’s nominees (most of the time, they are family) after that policyholder’s death. | The purpose of a health insurance policy is to provide financial assistance to the policyholder in case of a medical emergency like a disease or an accident. |
| Payout | Life insurance payouts are lump-sum payments that the nominees receive after the insured’s death. These payouts can be monthly or quarterly on request to the insurance company at the time of making the agreement. | The payout in health insurance is received at the time of settling the bill with the hospital (for cashless treatment and hospitalisation) or after the bill is settled (in the form of compensation) |
| Coverage Duration | Life insurance provides term life insurance (for a certain period of time), whole life insurance, or universal life insurance (for the entire life). | Health insurance spans over a year and needs to be renewed every year. |
| Premiums and Costs | The cost of this policy, that is, the premium, is determined by factors like age, gender, annual income, location, coverage, lifestyle, etc. | The cost of health policy is determined with the help of health, age, gender, coverage, existing illness, etc. |
Which One is Better?
Having a balanced and adequate insurance portfolio is essential, and hence, it is not about choosing one insurance product over another. Life insurance and health insurance are both financial tools that can help you secure your financial future. Both must be owned by anyone who wants to financially protect themselves and their loved ones in a time of crisis. Although both are equally important (since they safeguard different purposes), which one you should pick at the moment depends on your requirements and current circumstances.
Must Read: Terminal illness vs Critical Illness Coverage: Key Differences in Insurance Protection Plans
