Chapter 3: Health insurance vs life insurance
A common question people have while taking insurance is, what is the difference between health insurance and term insurance?
What is a term insurance?
A term insurance is a type of insurance wherein the family of the insurer receives a lump sum amount after the insurer’s demise. It’s a way to make sure your family is financially secure after your death. While taking a term insurance, you need to nominate beneficiaries who will be entitled to the amount when the time comes.
Why take term insurance?
Term insurance plans have the lowest premiums compared to all other types of insurance. A term insurance is very useful and an absolute must have for several reasons. Taking term insurance at a young age goes a long way in securing your family’s future. It provides for your children’s education, wedding, any debts you may have and other such expenses. Basically, after your demise, your family is free to use that money for various purposes.
Health insurance on the other hand, as you now know, covers only medical and hospitalisation expenses. Here’s a table which clarifies the health insurance vs life insurance confusion:
|Designed to take care of medical and hospitalization expenses of you and your family members, in case they’re part of the plan.
||Designed to take care of your family AFTER your demise. Your family will receive a lump sum as a single payment after your death. They can use it for various purposes.
|Premiums are higher than life insurance
||Premiums are the lowest among all types of insurance
|There is no maturity benefit, except during the end, where the premium along with interest is returned after the demise of the policy holder.
||In health insurance, you cannot recover money invested in premium amounts. If the insured meets with an untimely death, then you don’t receive any lump sum amount because there’s no life cover.
|You as well your family members’ paid premiums are exempted from tax implications under section 80D of the income tax act.
||You receive a tax exemption under section 80C upto Rs. 1.5 lakh. The final amount you receive is tax free under section as well.
Do you need both?
Life insurance and health insurance are very different from each other as you can see. Ideally, yes it is a good idea to have both, because you get security against not only untoward medical emergencies but also against an untimely demise after which your family can remain financially protected.
Now that you are fully aware of the difference between health insurance and term insurance, talk to an insurance expert and decide how you can take both, without burning a hole in your pocket!