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Health Insurance VS Life Insurance

Life insurance pays out a death benefit to the insured individual’s beneficiaries. Health insurance plans is pay for the policyholder’s current medical expenses. click here to know more.

  • 8,580 Views | Updated on: Mar 22, 2024

​Knowing that you and your family have a financial safety net even if your health takes an unforeseen turn is undoubtedly comforting. But paying for both a life insurance policy and medical insurance each month might be challenging when money is tight. It can be tempting to cut one or the other as costs rise in an effort to make ends meet.

Today, there are several more options than simple life insurance policies. You may choose health plans, pension plans, and disability plans. But only a few know and understand what is the difference between life insurance & health insurance.

When it comes to picking the best insurance policies, two particular ones that should be a part of your financial planning are Life Insurance and Health insurance. Though these terms are quite common, people often get confused regarding their varying terms and conditions. Read along to understand the basics of each policy.

Life Insurance vs Health Insurance Infographic

Understanding Life insurance vs. Health insurance

  • Meaning

Life insurance covers risks to your life in case of certain events. In comparison, health insurance is a general policy that covers treatment expenses if you are diagnosed with a covered illness. This is an essential thing you need to understand about life vs health insurance.

  • Policy benefits
  • A life insurance policy provides death as well as survival benefits. In addition, you may receive loyalty additions and surrender benefits for your life insurance policy. However, a health plan will only pay for the medical and treatment expenses. Another thing about health vs life insurance is that the former does not pay any benefit at the end of the policy term. It reimburses only the costs in case of an illness or accident.

  • Premium payment mode
  • You may pay the premium on your life insurance plan at periodic intervals or as a single lump sum. In most cases, the premium on a health plan is a lump sum amount paid for the entire policy duration. This is a crucial distinction between life insurance vs health insurance, as the coverage amount will be based on your financial situation.

  • Policy duration
  • In most cases, life insurance policies are long-term, lasting between ten and 20 years. In comparison, health plans are available for the short-term period between one and three years. This is an essential difference between life and health insurance because the latter must be renewed at the end of the term to ensure coverage.

  • Types of Coverage
  • Life insurance may either be an individual plan or a group plan. On the other hand, health insurance is available as an individual, family floater, and group policy. You must clearly understand this point between life vs health insurance to provide coverage for all your family members.

  • Policy types
  • Life insurance may include term plans, wealth creation, retirement, money-back, or endowment plans. Health plans are available as comprehensive covers, critical illness covers, and others. This distinction between life and health insurance will help you choose the most appropriate policy.

  • Tax benefits
  • The premium paid on the life insurance plan is eligible for tax benefits under section 80C of the Income Tax Act. In comparison, the premium on a health plan is tax deductible under section 80D of the Income Tax Act.

    Difference between life insurance and health insurance

    Life Insurance Health Insurance
    Is a comprehensive policy that provides full coverage for all your insurance needs over your life, not just for a specific expense. Typically only covers medical, surgical, and hospital expenses.
    The chosen type of life insurance will determine whether the premiums are set or adjustable. Most of the premiums are set. The costs paid during a medical emergency are covered by health insurance. These programs’ primary goal is protection rather than investment.
    Life insurance is an extended strategy. Health insurance is a transient strategy.
    It is for a set period of time and is cancelled after the insurance’s term is up. This type of insurance does not have a set term. In most cases, the insured renews the policy every year in order to keep the protective cover it provides.
    In the event of the insured’s passing, life insurance primarily serves to safeguard family, beneficiaries, or designee financially. Health insurance is a form of personal and family protection that helps to prevent unfavourable outcomes like a fatality brought on by financial hardship.
    Depending on the type of life insurance you select; there is both Survival, and Death rewards available at the conclusion of the insurance term. Health insurance just covers current Medical requirements and treatment; it does not provide a Survival or Death benefit.
    In some circumstances, by adding a small premium, the money invested may be returned to you tax-free at maturity, should you live through the policy’s term. There is no financial reimbursement at the conclusion of the policy period. The money is only returned as reimbursement and only against the costs spent for the illness or other medical expenses during the term.

    There are some differences between health and life insurance; however, both must be included in your portfolio. This is because these policies provide different benefits and are crucial for the financial security of self and family.

    Life insurance and health insurance are for those who are concerned about the future of their loved ones. Your medical expenses are covered by health insurance, and your family is taken care of in your absence by life insurance.

    It is better to take safeguards for the safety of your family now rather than later because life is unpredictable. For each of us, these two insurance policies are essential. Hence, it is advisable to understand the difference between the two and later take the decision that suits the best for you and your family.

    - A Consumer Education Initiative series by Kotak Life

    Amit Raje
    Written By :
    Amit Raje

    Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

    Amit Raje
    Reviewed By :
    Prasad Pimple

    Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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