Difference Between Life Insurance And Health Insurance.
Table of Contents
Life insurance is a type of insurance that pays a pre-decided amount of money to your family upon your death. This amount is called sum assured. To avail of this benefit, you have to pay a certain amount of premium every year to your insurer till you complete the duration of the policy.
The main purpose of life insurance is to compensate the family for the future income lost due to the death of the policyholder. It helps the family maintain a continuity of its finances even if it has lost its breadwinner.
While life insurance provides coverage against the risk of death, health or medical insurance offers coverage against various kinds of healthcare-related expenses (hospitalisation, surgeries, doctor's visits, etc.)
The aim of buying health insurance is to ensure that you and your family can receive quality treatment in times of need without facing any shortage of funds.
Difference Between Health And Life Insurance
Now that you have a basic understanding of the concept, let us take a look at the specific differences between life insurance and medical insurance. Here are some of the key parameters on the basis of which they differ from each other:
1. Coverage: While a life insurance policy essentially covers the risk of death, a health insurance policy covers expenses incurred on medical treatment and hospitalisation
2. Beneficiary: The beneficiary of a life insurance policy is not you but your family (or your nominee) as death benefit would be paid to them in case of your unfortunate demise. Meanwhile, in health insurance, you are the primary beneficiary of the reimbursements of your healthcare expenses.
3. Duration: A life insurance policy is mostly a long-term policy with the tenures usually ranging from 10 to 45 years. On the other hand, health insurance policies can be extremely short-term policies as well with some types of plans having tenures as low as a few months.
4. Returns: The premium paid for life insurance policy can come back to you at the time of maturity in case you hold an endowment policy. But the premium paid for health insurance once can never come back to you. It can only be recovered as reimbursement for your healthcare expenses.
5. Cost: Cost is a major point of difference between term insurance and health insurance. Term life insurance is much more affordable and cheaper when compared to other forms of insurance as it pays back only in the event of death during the policy term. Meanwhile, other types of insurance provide you benefits during your lifetime. So, the premium amount is higher.
6. Tax benefits: For life insurance, Section 80C of the Income Tax Act offers deductions of up to Rs. 1.5 lakh on premiums paid in a particular year. Also, Section 10(10D) offers tax deductions on claims, i.e.Death and maturity benefits.
Meanwhile, for health insurance, you can claim an income-tax deduction of Rs. 25,000 under section 80D for self, spouse and dependent children. An additional deduction for insurance of parents is available up to Rs. 25,000 if they are less than 60 years of age. If the parents are aged above 60, the deduction amount is Rs. 50,000.
Conclusion
While we can continue discussing the difference between life insurance and health insurance, the fact of the matter is that both of them are important. You cannot choose one over the other as both serve different purposes and offer coverage against different types of risks.
But it can be understood that cost plays a role and sometimes getting both health and life cover adequately can be tough. In that case, if you are relatively young and have a family to raise or kids to look after, prefer life insurance as it would secure your family’s future in case of any unfortunate event. But if you are in an age bracket or condition where chances of illnesses are high, prioritise health insurance so that you are able to afford your medical treatment.
Also read- What Is A General Provident Fund And How Does It Work
