Life and health insurance insure a person against a potential unfortunate event of life loss or a health complication. However, they are poles apart based on the types of insurance policies they offer. In order to understand both terms, knowing what is insurance is important.
Insurance is a written contract processing on a partial, fixed, full monetary premium between the person who is being insured and the service provider.
An alternative term for the service provider is the insurance agent, guarantor, or insurer. Simply put in a nutshell, the insured secures the lives of their family members (nominee) when they demise while health insurance secures the insurer’s life itself.
Life Insurance vs Health Insurance
The difference between life insurance and health insurance is that the health insurance company provides payments for medical expenses based on the fixed premium payments by the insured while the life insurance contract gives a nominee a fixed amount when the insured dies.
Comparison Table Between Life Insurance and Health Insurance
|Parameter of Comparison||Life Insurance||Health Insurance|
|Contract||The nominee set by the insured gets a fixed amount when the insured person dies||Medical expenses covered based on the premium paid as per policy are taken.|
|Coverage||Availed post-death occurrence||Medical expense and hospitalization|
|Governing Norms||Section 80C and Section 10(10D)||Section 80D|
|Investment||Long term commitment||Shorter commitment and can be altered|
|Recovery||Post-term maturity||Can be recovered, canceled and matured|
What is Life Insurance?
Life insurance is a contract sealed, signed and agreed by the insurer and the policy owner on the payment of a premium by the policy owner for securing the future of their family. Life insurance can also be called as life cover or life assurance given to loved ones after departing the world.
Life insurance aims to secure life after the death of the breadwinner. Forbes magazine as listed out the purpose of life insurance well aptly here.
The life insurance offers a death benefit to the beneficiary based on the cash value and premium incurred. Lastly, this link will offer a fair sense of understanding of the grading, types, and plans.
What is Health Insurance?
Due to the exponential upsurge of pharmaceutical companies and health-related hazards, health insurance is also something one must take in order to be able to be secured in the excessively expensive privatization of the health sector.
A health insurance policy ensures to safeguard and protect families against sudden hospitalization and other related expenses.
Health insurance also entails purchasing a policy based on the needs and requirements of the person to be insured.
Understandings, reading through and purchasing and effective and easy return health policy are very crucial. Health insurance covers medical expenses, doctor’s consultations, surgeries, blood tests depending on the policy taken.
Main Differences Between Life Insurance and Health Insurance
Life insurance is governed under section 80C and section 10 (10D) and health insurance follow the regulation set under section 80D.
The governing mandates laid by the income tax department are a very crucial part of the policy creation and purchase.
Hence through reading through will need the help of a lawyer. Best is to spend some monies and understand word to word of the section at concern.
Detail explanation of each section is hyperlinked below.
- Official Website of Income Tax Department
- Life Insurance : Section 80C and Section10(10D)
- Health Insurance: Section 80D
Contract and Coverage
A bond is signed by the insurer i.e. the life and health insurance provider based on the timeline, premium agreed, fixed amount to be paid by the insurer, type of policy, tax benefits, maturity term, accidental coverage, health claims and so much more.
There are numerous differences in the types of coverage offered and best is to connect with various service providers and they select the best deal.
In life insurance, the policy owner insures their life by paying a mutually decided premium on a monthly quarterly or yearly bases.
Post their death, the nominee is entitled to receive a fixed amount on a monthly base securing the future of their family.
As per health insurance, the insured person can improve and avail health benefits that cover their medical bills.
Also, just the person who takes the health policy benefits and the policy doesn’t cover the family health.
Investment and Recovery
The coverage of health insurance is easier to upscale, reduce or terminate as it is for a shorter duration than life insurance.
Also, the finances at stake with life insurance are much higher than health insurance.
Hence the money at stake is huge when it comes to life insurance and recovery is also not possible on immediate notice.
A life insurance plan benefits the insurer at a lager rate as well due to the frozen amount of money safeguarded by the life policy owner.
The policy owner usually agrees to not touch their money for a decided yearly commitment which can be of a minimum of 5 years and a maximum of 10 years.
While the money offered to the nominee can be up to a maximum of 30 years.
The health insurance can comparatively easily be upgraded, reduce coverage’s, discontinued as per the governing mandates as per the gubernatorial agreement.
The health policy expects an investment of a few lakh while the money at stake runs in crores to take up a life insurance policy.
Frequently Asked Questions (FAQ) About Life Insurance and Health Insurance
Is Health Insurance Part of Life Insurance?
Health insurance is an independent policy and is not considered as a part of life insurance.
However, there is certain insurance ‘Combi Plan’ or ‘Combi Policy’ in which the non-life insurer teams up with a life insurer to offer combined life and health insurance plan in which the insured enjoys a health cover along with a life cover under a combi policy.
What are the different types of Health Insurance?
Different types of health insurance are:
Indemnity Health Insurance Plans
It is the traditional health insurance wherein the insured is eligible for a fixed amount of medical cover. Examples of indemnity health insurance are individual insurance, senior citizen insurance, family floater insurance, etc.
PPO Health Insurance Plans
PPO or Preferred Provider Organization Plans to allow the insured to receive insurance cover for visiting a selected group of health care providers.
Point of Service Plans
As per Point of Service Plans, the insurance cover is offered for availing health services from a network of physicians approved under the plan.
Health Maintenance Organizations Plans
This kind of plan requires the insured to avail services from a physician approved by any of the Health Maintenance Organizations.
What are the four major options for Health Insurance?
The four major options for health insurance are:
a) Medicare (insurance for senior citizens and disabled).
b) Medicaid and Comprehensive Health Insurance Pool.
c) Employee health insurance plans.
d) Private health insurance plans.
Which type of Life Insurance is best?
Whole life insurance is best as it provides protection or coverage for life at a fixed rate of premium.
Also, the policy provides additional cash value that accumulates over time, against which the insured can even borrow money.
How do I choose a Life Insurance plan?
While choosing a life insurance plan you should compare the overall cost involved with the benefits offered by the plan.
The choice you make should be need-based. For instance, if you require a life insurance cover only until you reach a certain age limit, you can opt for a term life insurance instead of whole life insurance which is comparatively expensive.
What age should you buy Life Insurance?
An ideal age to get a life insurance policy is under 35 because it can help you in buying a policy at very low premium rates.
Simply put as per life insurance, the nominee or the insured gets the assured sum of money post submitting a proof supporting the demise of the insured or the policy owner.
On the other side of understanding, health insurance no returns are paid to the insured or their family member on a term-end or demise.
The reimbursement is only given back as a cashless medical treatment subjected to the covered policy taken.
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