There is often a state of confusion around life insurance and health insurance. Many believe both to be the same thing, and others opt for both insurance policies. In this article, let us understand the differences between life insurance and health insurance.
What is life insurance?
A life insurance policy provides coverage for the beneficiary upon the death of the life insured, granted that the policyholder doesn’t default any premiums. One thing to note here is that the ‘Life insured’ and the ‘Policyholder’ can be the same person or different people.
The coverage in life insurance is called the death benefit. It is a lump sum that is given to the beneficiary and the sum will be fixed in the insurance contract.
A life insurance policy may be a term or permanent. A term life insurance will provide a death benefit to the beneficiary if the life insured were to die within a certain time frame. This can vary between 20 to 30 years.
Permanent life insurance will provide the death benefit to the beneficiary upon the death of the life insured. There is no time frame put in place. Most permanent life insurance policies come with a cash deposit feature.
What is health insurance?
A health insurance policy provides coverage for the insurer when they require medical assistance. Unlike life insurance, health insurance provides coverage for the insured while they are alive.
A health insurance policy can cover an individual or a group, like a family. You can choose between them based on your requirements.
Another difference between life insurance and health insurance is that life insurance provides coverage for a large span of time, typically, years. However, term life insurance is different. It needs to be renewed on yearly basis.
What is the difference between life insurance and health insurance?
As we discussed, the biggest difference between life insurance and health insurance is the way their coverage works.
A life insurance policy coverage is the death benefit that the nominee receives upon the death of the life insured. The death benefit will be mostly tax-free can be put to use as the beneficiary seems fit. Normally, the life insured puts one of their family members as the beneficiary, and the money can go to the education of their kids, medical treatment of the spouse, or other matters of importance.
In health insurance, the concept of death benefit is not there. The goal of the policy is to provide monetary assistance to the insured for medical expenses.
Should I choose a life insurance plan or a health insurance plan?
Choosing between a life insurance plan and a health insurance plan is often a matter of confusion. There are advantages to both insurance types. We will review a few of them below:
Why choose a life insurance plan
Provide coverage for your family in your absence: One of the major concerns we have when we are in a family is what our dependents will do in our absence. You may have children who need to complete college or a spouse who needs medical assistance. When you are the sole earner of the family, your absence can cripple the household. Life insurance provides monetary support for them even when you are no longer here to support them.
It is a form of investment: When you choose a universal life insurance plan, it comes with maturity benefits. You can reinvest the maturity amount for additional investment options. This makes a life insurance policy a great investment option in addition to the death benefit factor.
Helps to create a large sum saving: Even though the premiums of life insurance policy may not amount to much, it is spread over decades. This makes the final amount a great sum. This helps the insured to nurture a habit of saving from their income towards building an investment.
Why choose a Health Insurance Policy
Hospital visits are a necessity: There is no denying that hospitals will become a part of our lives sooner or later. And when it ultimately happens, we might have to undergo expensive surgeries or other procedures, not to mention the room rent. In such cases, health insurance provides monetary coverage to take care of all the expenses.
Hospital bills are skyrocketing: As a result of inflation, medical bills are skyrocketing, and there is no sign of stopping. So the amount that you spend today on a surgery might look meager when compared with what you might have to shell out a few years later. Having a health insurance policy will cover the medical expenses of the future and it won’t bear high on you.
Additional benefits: You can opt for additional benefits in the form of riders. For example, critical illness cover is additional coverage that you can buy to extend the health insurance policy to cover critical illnesses like cancer. There is also a variety of options like maternity coverage for when the person is admitted to a hospital for labor.
We now know that Life Insurance and health insurance are very different from each other, and their benefits are amazing. So the best recommendation is to buy both policies if your income can support it.
One thing to note here is that if you are young, then you will also have the benefit of low premiums. However, we do understand that some may not have the financial freedom to support two different insurance policies along with other payments like rent, loans, etc. In that case, you will have to choose between the two and the choice may be confusing.
Get expert help
If you are confused about which insurance policy to choose or need more info on what we have discussed here, then contact RH Insurance Agency. We provide our clients with insurance assistance to help them make the right purchase decision. Choosing between insurance policies can be a little tricky, so let us help you through it!