Health Insurance Plans V/S Term Insurance Plans

Most individuals are aware of the importance of insurance. Insurance plans provide financial assistance in times of need along with offering convenience through services such as health benefits, death coverage, and additional riders. Although everyone recognises that insurance is a must in unanticipated circumstances, not all insurance plans are the same. The various types of insurance plans are used for different motives. Term insurance and health insurance are the two significant insurance policies for youth. Read on to know more about the differences between both policies. 

What is a Health Insurance Plan?

Health insurance is a contract between the policyholder and the insurance company that provides financial compensation if the life assured contracts a certain illness. The terms and extent of your health insurance coverage determine the amount of fiscal payout. The goal of health insurance is to protect your finances from unexpected and big medical bills. Generally, payment is limited to the actual expenses incurred or the sum assured.

What is a Term Insurance Plan?

The term insurance plan refers to the agreement between the policyholder and the insurance company to pay financial compensation to the life assured's nominee in the event of the life assured's death. Term insurance aims to give financial support to the life assured's family after him/her. However, the term insurance policy does not offer maturity benefits if the life assured survives the policy term. 

Also read - How Important Is Life Insurance In Current Scenario?

Health Insurance Plan V/S Term Insurance Plan

Both types of insurance plans- term insurance plans and health insurance plans - are necessary for a smooth financial life for yourself and your family. The following are the primary contrasts between the two. 

1. Purpose - Term insurance is designed to offer financial support to your family in the event of your death. During your lifetime, there is no benefit. The goal of health insurance, on the other hand, is to give financial support in the event of a major medical emergency.

2. Coverage - If the life assured dies, term insurance gives financial support to his/her family. If the policyholder or covered family members suffer from injuries, diseases, or disabilities, health insurance covers hospital bills and doctors’ fees. 

3. Premium - Term insurance premiums are low and convenient to the majority of people. However, health insurance premiums are expensive, especially after a certain age. Hence, it is a good idea to have health insurance when you are healthy and young. 

4. Renewal Benefits - There is no renewal benefit with term insurance. You normally pay the same amount each year for regular term insurance. On the other hand, if your health insurance coverage has never been used, you can get a No-Claim Bonus (NCB) at your next renewal.

5. Tax Benefits -  Under Section 80C of the Income Tax Act, term insurance premiums are tax-deductible up to Rs. 1.5 Lakhs. Moreover, even the death benefit payout is tax-free due to Section 10(10D) of the Act. The cost of health insurance is deductible under section 80D of the tax code.

Take Away

It is crucial to grasp the fundamentals of any insurance plan before purchasing the coverage as a well-informed choice leads to a better result. Both insurances provide benefits to policyholders in different ways and have their own set of advantages and drawbacks. Your choice should be based solely on your needs as well as your family's lifestyle.

You may also like to read - Term Insurance: Limited Pay V/S Regular Pay

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.