Difference between Life Insurance and Health Insurance

Insurance plans are financial tools typically designed to safeguard you from the spiralling financial and mental stress of unanticipated mishaps and setbacks. They are designed to provide you with a cushion against risks and uncertainties. Be it a health insurance plan or life insurance—the purpose is to safeguard your finances in times of distress.

The different types of insurance cover different types of situations and circumstances. Some insurance types overlap as well. Today, we will look at the features of health insurance plans and life insurance, and how they offer help in the time of your need. 

Life insurance and its types

Life insurance is a personal safety net that your family can fall back on in your absence. As part of the contract, the insurer promises to pay a specified sum to the insured or his/her nominees after a certain period or in case of the policyholder’s death.

Life is unpredictable and you do not know what’s stored in the future. You may be the sole breadwinner of the family and your absence can cause serious financial stress to your family. And, anyway, you will need accumulated wealth or a source of income in your later years as well. If you have big plans for your children’s higher education or their marriage, you would have to take extra care and arrange for a source of finance for that. Your life insurance plan can provide you with the much-needed cushion in such times.

There are primarily two types of life insurance plans:

1. Whole life insurance: These life insurance plans offer a fixed sum after a certain period against fixed premium payments. In such plans, there is no risk and guaranteed returns. In some cases, you can also take a loan against these plans.
2. Universal life insurance: These life insurance plans are perfect if you are looking to create a corpus for a long-term goal. These plans offer flexible and periodic payouts. Also, a part of the payout is reinvested to add to the final sum assured. The premium for universal life insurance plans is usually flexible and so are the death benefits.

Health insurance and its types

Health insurance plans provide you with financial assistance in case of a medical crisis. Medical inflation is ever-rising. Having to pay for your medical expenses, especially in the face of a crisis, can cause a big dent in your pocket. You may even have to dig into your savings during a medical emergency.

Also, if you have aged parents then it is all the more important to invest in health insurance for senior citizens. This is because old age compromises immunity and makes the elderly more prone to illness, thus needing frequent medical attention. Buy a health insurance plan that provides comprehensive coverage to you and your family.

There are primarily three types of health insurance plans:

1. Individual health insurance: This type of health insurance plan is designed for individuals. They provide coverage for a single person—the policyholder. If you have just kickstarted your career and do not have many financial obligations, then this is the best option for you. At this stage, you will get good coverage for a lower premium. The sooner you get medical insurance, the better for you in the long run.
2. Family floater health insurance: These are health insurance plans designed to meet the medical needs of the entire family. If you are looking to buy health insurance for your parents, spouse, and kids, buying separate plans for each one of them will be expensive and cumbersome. Instead, you can buy family floater insurance that would cover the entire family under a single plan.
3. Senior citizen health insurance: This plan is categorically designed for aged people who may have pre-existing conditions. If you are seeking health insurance for your parents, then consider this plan. Their medical assistance requirements will be more compared to younger people, and health insurance for senior citizens will give them thorough coverage at a slightly higher premium cost.

Difference between life insurance and health insurance plans

Here are some fundamental differences between life insurance and health insurance plans:

Sr. No.	Life Insurance Plan	Health Insurance Plan
1.	Life insurance is not situation specific. It is paid out either periodically, or after a certain time span, or on the demise of the insured.	Health insurance coverage is specifically made for medical crises and health emergencies. It covers the cost of hospitalisation, medical procedures, diagnosis tests, and other related components.
2.	Depending on the type of life insurance plan one chooses, the premium amount can be either fixed or variable.	Usually, the premium pay for health insurance plans remains fixed. One gets the benefits of a No Claim Bonus either in the form of an increased sum assured or as a reduced premium at the time of renewal.
3.	A life insurance plan is typically a long-term plan.	Investing in a health insurance plan is to stay guarded against circumstantial medical emergencies.
4.	The tenure of life insurance plans is usually fixed and long and runs for years. It gets terminated after the tenure is over.	Health insurance plans are annual in nature, after which they lapse. One has to pay a premium to continue it.
5.	In terms of coverage, a life insurance policy typically provides financial cover to the family or the nominee of the insured.	In health insurance plans, you can choose to buy a cover for yourself, and your family or you can buy separate health insurance for senior citizens.
6.	The objective is to provide financial cover in case of the demise of the insured.	The objective is to be able to bear the costs of treatments of the insured and avoid any unprecedented setback like death.
7.	Depending on the type of life insurance plan you choose, you will get both survival and death benefits.	Irrespective of the type of health insurance plan you choose, it will not provide any death or survival benefits. This is because the very premise of health insurance is to cater to the current healthcare emergencies.
8.	Provides financial security.	Covers the costs of medical needs and treatment.

While both types of insurance, be it life insurance or health insurance plans, provide financial support, the nature and the applicability of the two are very different. It is interesting to note how both life insurance and health insurance are equally significant. Both offer a different set of necessary coverage and are important for a stress-free life.