Updated On: 23rd September, 2023
At some point in life, we all need healthcare, and it is vital to have the necessary financial backing for you and your loved ones to not only cover the costs of healthcare but also to prevent a mountain of debt. To ensure your financial security in the future, you need to plan in the present.
Key takeaways
- A mediclaim policy is a type of insurance cover that provides only limited financial protection for specific health needs.
- Term insurance is a type of life insurance product in which the family members receive financial support in the unfortunate event of the policyholder-insured person’s death.
- Health term insurance is a type of insurance product that provides extensive financial protection for a wider scope of health issues.
Financial planning with the help of mediclaim insurance, health insurance, and term insurance can reduce the burden of expenses when a health crisis strikes while providing monetary support in your absence.
A mediclaim policy, a health insurance plan, and a term plan all provide financial coverage in exchange for the payment of premium by the person who avails it. However, this is where the similarity ends. All three types of insurance provide a varying scope of benefits for different health needs and eventualities
What is a Mediclaim Policy?
A mediclaim policy is a type of insurance cover that provides only limited financial protection for specific health needs. The extent of coverage in a mediclaim policy is pre-defined and restricted to specific ailments, accidents, and injuries. In the event of an unforeseen health crisis, a mediclaim policy will only take care of the costs of in-patient hospital care at an allopathic facility or domiciliary care (treatment at home). It does not settle ancillary medical expenses or provide financial support to the policyholder’s insured person’s family. Moreover, a mediclaim policy covers hospitalization costs up to ₹5,00,000 only.
Some of the advantages of having a mediclaim policy are as follows:
Financial Protection
The most significant benefit of a mediclaim policy is the financial protection it provides. Medical treatments and hospitalization can be expensive; without insurance, these costs can quickly drain your savings or lead to debt. A mediclaim policy covers a significant portion of your medical expenses, reducing the financial impact on you.
Access to Quality Healthcare
Mediclaim policies allow you to access a network of hospitals and healthcare providers. This network is carefully curated to include some of the best healthcare facilities in your region. Having health insurance gives you the peace of mind that you can receive treatment from top-notch healthcare professionals.
What is Health Insurance?
Health term insurance is a type of insurance product that provides extensive financial protection for a wider scope of health issues. The coverage in health insurance is more than that of a mediclaim policy. The policyholder receives all-around protection in the event of an illness, injury, or accident. Health insurance settles the costs of hospitalization for medical treatment and the cost of additional medical expenses. It takes care of pre and post-hospitalization expenses, expenses for domiciliary care, and expenses for non-allopathic treatment systems (AYUSH - Ayurveda, Yoga, Unani, Siddha, and Homeopathy). It also includes the costs of various surgical procedures, traditional and modern forms of treatments, outpatient treatments, medicines, and ambulance and transportation charges, among other allied expenses.
Let us now understand the benefits of health insurance:
Reduced Out-of-Pocket Costs
Health insurance typically includes various cost-sharing mechanisms, such as copayments, deductibles, and coinsurance. While these expenses are still incurred, they are usually more manageable than paying the full cost of medical services out of pocket. In some cases, health insurance plans also have maximum out-of-pocket limits, providing a financial safety net once a certain limit is reached.
Family Coverage
Many health insurance plans offer family coverage, allowing policyholders to extend benefits to their spouses and dependents. This ensures that the entire family is protected, making it easier for parents to care for their children’s health needs. Family health insurance plans are especially valuable for ensuring the well-being of growing families.
What is Term Insurance?
Term insurance is a type of life insurance product in which the family members receive financial support in the unfortunate event of the policyholder’s death in the form of a pre-fixed monetary sum (called a sum assured) to the policyholder’s chosen nominee(s) or beneficiary. To receive the sum assured, the policyholder has to pay a specific premium during the policy term.
Some of the major benefits of term insurance are:
Affordability
One of the most significant advantages of term insurance is its affordability. Term policies are typically much cheaper than permanent life insurance options like whole life or universal life insurance. This affordability makes term insurance accessible to a wide range of individuals, including young professionals, families on a budget, and those looking to maximize coverage within their budget constraints.
High Coverage Amounts
Term insurance allows you to purchase a substantial amount of coverage for a relatively low premium. This means that you can ensure your loved ones are financially protected in the event of your untimely demise without breaking the bank. The high coverage amounts are especially crucial when you have significant financial responsibilities, such as mortgage payments, education expenses, and other outstanding loans.
Difference Between Health Insurance, Term Insurance, and a Mediclaim Policy
While health insurance, term insurance, and a mediclaim policy all serve the purpose of providing financial security, they have distinct features and purposes.
We will now break down the differences between these policies to help you make an informed decision.
Criteria
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Health Insurance
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Term Insurance
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Mediclaim Policy
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Purpose
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Provides coverage for medical expenses, hospitalization, and healthcare-related costs.
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Provides a lump-sum payout in case of policyholder’s demise during the policy term.
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Provides coverage for hospitalization expenses due to illness or accident.
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Coverage
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Covers healthcare expenses, including doctor’s visits, surgeries, medications, and preventive care.
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Does not provide coverage for medical expenses but offers a death benefit to beneficiaries.
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Focuses solely on covering hospitalization costs and related medical expenses.
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Policy Term
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Renewable annually or for multi-year periods, offering long-term coverage.
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Covers a specific term, after which the policy expires.
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Usually, it is a short-term policy, covering one year at a time.
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Premium Payments
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Regular premium payments are required as long as the policy is in force.
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Regular premium payments for the specified term; no returns if the policyholder survives the term.
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Premiums are paid annually and may vary based on age and health conditions.
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Payout
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Reimburses medical expenses or provides cashless hospitalization based on the policy coverage.
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Provides a lump-sum payout to beneficiaries if the policyholder dies during the term.
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Covers hospitalization expenses up to the sum insured, minus deductibles or co-payments.
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Survival Benefit
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Offers no survival benefit; premiums are paid for coverage of medical expenses.
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Provides no survival benefit; the policyholder receives nothing if they outlive the term.
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No survival benefit; premiums provide coverage only in case of hospitalization.
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Tax Benefits
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Premiums paid and benefits received are eligible for tax benefits under Section 80D of the Income Tax Act.
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Premiums paid and the death benefit are eligible for tax benefits under Section 80C and 10(10D) of the Income Tax Act.
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Premiums paid are eligible for tax benefits under Section 80D of the Income Tax Act.
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Riders/Add-Ons
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Additional riders can be added for enhanced coverage, such as critical illness or maternity benefits.
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May offer riders like accidental death or disability coverage, which can be added for extra protection.
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Some mediclaim policies may offer riders for specific illnesses or extended coverage.
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Summing up
Health insurance, term insurance, and mediclaim policies serve different purposes and cater to distinct financial needs. Health insurance focuses on healthcare-related expenses, term insurance provides a lump-sum payout upon the policyholder’s demise, and mediclaim policies offer coverage for hospitalization expenses. Depending on your financial goals and priorities, you may need one or more of these policies to ensure comprehensive financial protection. It is essential to carefully evaluate your requirements and consult with insurance professionals to choose the right insurance policies for your specific needs.
