The Difference between Life Insurance and Health Insurance

There is a thin line separating life insurance from health insurance. When it is time for you to undertake a financial planning exercise, you must understand these two forms of insurance and learn about their requirements so you’re able to make an informed decision.

DEFINITION

Just as the name goes, “Life insurance” is like taking care of your safety for life.

It is a bond or agreement between the person getting insured and the insurance company that in the unfortunate event of the insured’s demise, the life insurance he/she paid premiums for, bears fruit in terms of financial benefits to the beneficiary/nominee.

Life insurance offers an insurance cover for your entire life. You can see it as your future full-proof savings plan for your family in case of your demise.

On the other hand, if you have health insurance, you go into an agreement with the insurance company, where the insurance company pays your medical expenses directly on your behalf, depending upon the health insurance policy. On some occasions, health insurance covers the cost of your prescription medicines.

TYPES

Life Insurance

There are two main categories of life insurance and they are:

Whole life insurance: This category of life insurance involves fixed premium payouts and provides an agreed sum assured to the beneficiary, which is generally tax-free and fixed. The whole life insurance is less expensive than any other type of life insurance. Its benefits include its consistency and little or no risk approach. In some cases, one can choose to take a loan too against this kind of policy.

Universal life insurance: This is the second category of life insurance that provides the beneficiary or nominee with a death benefit. However, unlike the whole life insurance, the universal life insurance come with premium payouts that are generally flexible, and a part of the payment is invested to add more cash-value to the sum assured.

Health Insurance

There are three main categories of Health insurance:

Individual Health Insurance: This insurance policy is specially customized for a single person. This policy safeguards the beneficiary or nominee from various illnesses, accidents, hospitalization expenses and, other medical emergencies that may arise in one’s lifetime.

Senior Citizens Health Insurance: This is a special type of health insurance specifically created for senior citizens (people above the age of 60). This premium covers the various physical and psychological needs of senior citizens.

Core Benefit

Life Insurance: An agreed sum (Death Benefit) is paid to the nominee of the person.

Health Insurance: Covers the treatment cost for illnesses/ medical conditions subject to a maximum coverage amount and other conditions.

Additional Benefits

Life Insurance: Maturity Benefits and Loyalty Additions can be added to the death benefits.

Health Insurance: No Bonus is added asides from free health check-ups on rare occasions.