Policies like health and life insurance cushions you and your family against financial shocks when life takes a turn. But not all insurance works the same way. Life insurance and health insurance for family serve very different purposes. Let’s break them down so you know exactly what each one does and how to choose what is right for you.
What is a life insurance policy?
A life insurance policy is a contract where you pay a premium, and the insurer pays a fixed sum, called the sum assured, to your family if you pass away during the policy term.
What are the types of life insurance policies?
The right life insurance plan depends on your goals, budget and life stage. Here are the main types of life insurance policies:
- Term life insurance: This is the most affordable and simple life cover. Your family will receive the full payout if something happens to you during the years you are paying a fixed premium.
- Whole life insurance: This type of insurance covers you for your entire lifetime, often up to the age of 99 or 100. Your family receives the full payout whenever you pass away.
- Endowment plans: An endowment plan provides life insurance coverage along with a savings component. It pays a lump sum either if you pass away during the policy term or if you outlive it.
What is a health insurance policy?
Health insurance is a policy that helps you manage the cost of medical treatment. The insurer will cover your hospital bills either directly at network hospitals or by reimbursing you, as long as your health insurance policy is active and premiums are paid on time.
What are the types of health insurance policies?
Health insurance comes in various forms. The different types include:
- Individual health insurance: This covers only the policyholder. It offers a dedicated sum insured and is best for those with specific health needs or who live alone.
- Group/employee health insurance: This policy type is normally provided by employers. It covers a group of people under one plan. This plan is convenient but limited to your employment duration and may not always offer comprehensive coverage.
- Senior citizens’ health insurance: Such policies are customised for individuals aged 60 and above. They offer higher coverage for age-related ailments, pre- and post-hospitalisation and often require a medical check-up before policy approval.
- Family floater plan: This plan covers your entire family under a single sum insured. For instance, if you have a ₹10 lakh floater plan, any family member can use up the sum based on their medical needs.
- Critical illness plan: This provides a lump-sum payout upon diagnosis of specific life-threatening diseases like cancer, heart attack or stroke.
How does a life insurance policy work?
A life insurance policy pays a fixed amount to your nominee if you pass away during the policy term. You pay regular premiums monthly or yearly for coverage. The amount depends on your age, health and the type of plan. Certain life insurance policies, like endowment plans, whole life insurance or return-of-premium term plans, may give you a maturity benefit if you outlive the policy term. However, standard term plans usually do not include this feature.
How does a health insurance plan work?
Health insurance covers medical expenses through two claim types: cashless, where the insurer directly pays the network hospital, and reimbursement, where you pay upfront and later submit documents to get the amount refunded.
What is the difference between health insurance and life insurance?
If you have been wondering what is the difference between health and life insurance, here is a quick look at how they differ:
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Feature
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Life insurance
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Health insurance
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Purpose
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Financial support to the family after death
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Covers medical expenses during lifetime
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Claim trigger
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Death of policyholder
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Hospitalisation or medical treatment
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Tenure
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Long-term (10-40 years or lifetime)
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Usually short-term (1-3 years, renewable)
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Payout type
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Lump-sum to nominee
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Cashless or reimbursement to the insured
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Survival benefits
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Available in some plans (e.g. endowment)
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No survival benefits
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Tax benefit
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Section 80C
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Section 80D
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Best for
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Family’s financial future
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Managing healthcare costs
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Health vs life insurance: Which one should you choose?
It is not a question of health insurance vs life insurance. Both are important. However, start with an affordable term life policy for high coverage, then add a health insurance plan (individual or floater based on family size). For added protection, consider riders like critical illness or accidental cover.
Conclusion
Both health insurance and life insurance play a distinct role in safeguarding your future. Treatment expenses are rising every day, and having the right medical insurance can protect your savings and give you peace of mind during emergencies.
FAQs
- What is the key difference between life and health insurance?
The difference between life and health insurance is that life insurance pays your family after your death, whereas health insurance covers medical costs while you are alive.
- How do benefits differ between health vs life insurance?
The difference between health insurance and life insurance is in the benefits. Health insurance pays for treatment, and life insurance pays a lump sum to your family.
- What is the role of life insurance vs medical insurance in planning?
Life insurance vs medical insurance comes down to timing. One supports your family after you are gone, and the other helps with treatment costs now.
- What is the life insurance and health insurance difference for tax?
The difference between life insurance and health insurance for tax purposes is that life insurance falls under Section 80C, while health insurance qualifies under Section 80D.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It is not intended as a substitute for professional advice, diagnosis or treatment. Please consult a certified medical and/or nutrition professional for any questions. Relying on any information provided in this blog is solely at your own risk, and ICICI Lombard is not responsible for any effects or consequences resulting from the use of the information shared.