Life Insurance vs Health Insurance – What’s the Confusion?
3 min read
・Jun 20, 2024
Are you puzzled over the difference between life and health insurance? The confusion can arise from not understanding each type’s specific benefits and how they apply to different stages of life.
Understanding the difference between the two is important, as each serves a unique purpose in your financial portfolio and provides financial securities against medical or life emergencies. Let’s examine both these insurance plans in detail to help you make informed decisions.
What is Life Insurance?
Life insurance is a contract where you pay regular premiums to an insurance company, and in turn, they agree to pay your beneficiaries a specified sum upon your death. It provides peace of mind, knowing your family is taken care of even in your absence.
Benefits of Life Insurance
Having life insurance is an integral part of financial planning that comes with several key benefits:
- Financial Security for Nominees
One of the primary benefits of life insurance is that it provides financial security to your beneficiaries. It ensures that in the event of your untimely demise, they receive a sum that can help cover their living expenses, debts, and future costs like education.
- Tax Benefits
With a life insurance policy, you can enjoy tax deductions of up to Rs. 1.5 lakhs under Section 80C of the Income Tax Act. Additionally, the death benefit received by your nominees is also tax-free under Section 10(10D).
- Added Benefits with Riders
Riders or add-ons are extra benefits that you can add to a standard life insurance plan to enhance its coverage. These include critical illness cover, accidental death, and disability riders. They enhance your insurance coverage, providing broader protection beyond the standard policy terms.
What is Health Insurance?
Health insurance provides coverage for your healthcare needs. It reimburses you or pays directly to the healthcare provider for medical and surgical expenses incurred due to illnesses or accidents. It’s a convenient way to manage high healthcare costs and ensures you don’t have to bear the entire financial burden of medical treatments.
Benefits of Health Insurance
Health insurance comes with numerous benefits, including:
- Coverage for Pre and Post-hospitalization Expenses
One of the benefits of health insurance is the coverage of pre- and post-hospitalisation expenses. This means that costs incurred for tests, consultations, and medications before being admitted to the hospital, as well as follow-up treatments and medications after discharge, are covered.
- Coverage for Routine Check-ups
Many health insurance plans also cover the costs of regular check-ups, which encourages you to maintain regular health monitoring without the stress of additional expenses. This helps with better long-term healthcare outcomes.
- Tax Benefits
Like life insurance, health insurance premiums are also eligible for tax deductions of up to Rs. 25,000 under Section 80D of the Income Tax Act. This benefit increases to Rs. 50,000 for senior citizens.
- No Claim Bonus
A no-claim bonus is a reward insurers give for not making any claims in a policy year. This bonus often comes as an increased sum insured for the same premium or a discount on the following year’s premium.
Life Insurance Vs Health Insurance: Head-to-head Comparison
| Feature | Health Insurance | Life Insurance |
| Coverage | Medical bills, hospitalisation, pre- and post-hospital care, routine check-ups. | Provides coverage in the event of the policyholder’s death within the policy term. |
| Benefit Type | Direct benefit to the insured for health-related expenses. | Benefit to the nominees/family of the insured after death. |
| Policy Term | It is for the short term. | It is typically for a longer tenure. |
| Tax Benefits | Tax deductions under Section 80D. | Tax deductions under Sections 80C and 10 (10D). |
| Additional Features | No claim bonus, health check-up coverage, and wellness benefits. | Riders for additional protection (e.g., accidental death, critical illness). |
Key Takeaways
Whether to opt for life vs health insurance, or both depends on your unique personal and financial situation. For comprehensive protection, it’s best to include both types of insurance to safeguard your family’s future and your health.
But to choose the right plan, consider different parameters, such as your needs, the premium amount, and the insurer’s reputation. This allows you to purchase an affordable insurance plan with the right coverage, alongside dependable support from the insurer when it’s most needed.
An average person spends 25% of their income on healthcare (global data). In cases of severe health conditions, these expenses can significantly strain your financial resources. With the right health insurance , you can save on these costs and avoid a financial crisis for you and your dependents. Similarly, with the right life insurance plan, you can provide financial security for your family members in your absence.
Make informed decisions and streamline your insurance selection process by exploring and comparing plans on PhonePe, ensuring comprehensive protection for you and your family.
Frequently Asked Questions
If I already have an existing health insurance plan, should I still buy life insurance ?
Are health insurance premiums cheaper than life insurance premiums ?
Should I purchase both life and health insurance plans together ?
Which should be bought at an earlier age, life or health insurance ?
What are the different types of life and health insurance plans available on the PhonePe app ?
