What Is The Difference Between Health And Life Insurance?
After learning and researching a lot about financial plans, you have come to a conclusion where you agree to buy insurance policies to safeguard your future. Insurance policies are a must-buy thing. But, the question arises of which type of insurance we must put our hard-earned money into. Two significant options that directly come into the picture are Life insurance and health insurance.
They have their own set of benefits that they offer to the policy and it becomes important to know the difference between health and life insurance. It becomes a tedious task to choose whether to secure your family’s future after you by opting for life insurance or manage your monthly budget by mitigating unwanted medical bills by opting for health insurance.
The youth of India are more aware than those of previous generations. This is clear from the fact that investments in insurance are growing in India. As per reports , the insurance industry grew by 10.3% in 2022 and 7.9% in 2021. So, let us learn about the difference between health and life insurance.
What is the difference between life insurance and health insurance in tabular form?
The table below demonstrates the difference between the life insurance and the health insurance.
Some essential difference between health and life insurance is discussed in the table above. To understand the difference between life and health insurance more clearly, let's discuss them separately.
What is a life insurance policy?
Life insurance contributes to 76% of the total insurance market of India . Life insurance is simply a kind of contract between an individual and an insurance company where the insurance company provides a certain predetermined amount as coverage to the individual’s family upon his demise. The amount of coverage determines the monthly installments known as premiums that the individual pays to the company.
Life insurance is very important for everyone to secure their family's future, but still, barely 4% of people have life insurance. Of every 100 people, 52 have life insurance policies in the USA. In Urban India, 73% of the people are life insured but the number goes drastically low for rural India.
What are the Benefits of Buying Life Insurance?
Many benefits of life insurance make it a compulsory buy for everyone. Apart from its direct benefits, there are other benefits related to taxes. Here is a list of some benefits of life insurance.
- The financial security and the protection of the policyholder’s family are the foremost benefits of life insurance.
- The coverage amount from the life insurance policy is tax-exempt under Section 10(10D) of the Income Tax Act.
- The life insurance premiums are tax deductibles. Section 80C of the Income Tax Act of 1961 makes all life insurance policies eligible for tax exemption.
Apart from these tangible benefits, there are psychological benefits. The policyholder has a sense of security for his family that gives him great relief.
What are the different types of life insurance?
There are two types of life insurance: whole life insurance and term-life insurance. The whole life insurance provides coverage upon the policyholder's death irrespective of the time. It has a constant premium throughout the tenure. It also provides cash value benefits that grow over time and can be used after retirement.
The term life insurance provides coverage to the policyholder’s family upon the death of the policyholder before a certain time. The premium rates of the term life insurance are generally increased at the time of renewable and it has no benefits of cash value. The premium rates of term-life insurance are comparatively lower than whole-life insurance.
What is a Health Insurance Policy?
Health insurance is a legal contract between an individual and the policyholder that ensures that the insurance company will cover the medical expenses of the individual under certain situations. People are generally introduced to health insurance as their employer's extra-employee benefit regime.
Health insurance provides a range of services like regular health checkups, cashless hospital visits, and daycare procedures. The premium cost of health insurance usually depends on factors such as age, coverage amount, medical history, underlying medical issues, and add-ons.
Paying hospital bills through health insurance is not so prevalent in India. As per reports , only 514 million(34%) people have health insurance in India which is relatively low compared to other developed countries. Over 90% of the people in the USA pay their medical bills through health insurance. The government regulator body IRDAI has used many methods to increase the awareness about it in the public. But still, India is far behind the other countries.
What are the Benefits of Buying Health Insurance?
Health insurance can play a very crucial part in your financial journey by removing the financial burden of any unexpected medical bill. Here are a few benefits of health insurance that everyone should know.
- Health insurance covers all the medical bills at the time of hospitalization. The average cost of hospitalization is more than 6000 per day in private hospitals in India.
- Section 80D provides a tax deduction of 25,000 annually on health insurance for individuals under 60. But this tax deduction amount goes up to Rs.50,000 for senior citizens.
What is the Difference Between Term Life Insurance and Health Insurance?
Yes, term life insurance and health insurance are quite similar as both expire at the end of a certain period and need to be renewed. But they both are completely different things and used for completely different purposes. The term life insurance provides coverage when an individual dies before a certain period.
The tenure of term life ranges from 5 to 40 years. Health insurance, on the other hand, does not provide any coverage on the policyholder's demise until it is mentioned in the policy. The term period of health insurance is generally one year. Some companies, such as Reliance General Insurance , provide long-term health insurance for 2 or 3 years. Hence, term life insurance and health are two different things serving different purposes.
The above-discussed difference between health and life insurance does not fade the individual importance of each. They both are for different purposes and are useful in their ways. Incorporating both of them in your financial plans is important for your financial journey. People tend to neglect them by thinking of them merely as financial products.
