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Life Insurance vs Health Insurance: The Difference

By Juhi Walia
19 October 2022, 12:07 PM

Many people are undecided about obtaining life insurance and health insurance when it comes to insurance purchases. Each one of these insurance policies has its own set of advantages. Which one ought you to pick then? – Is life insurance enough to ensure your family's financial security in the event of your passing? Or health insurance? Which one will provide you with a solid financial cushion to cover medical expenses if your health declines? Let's investigate.

Getting to Know About Life And Health Insurance

To make a learned decision, you must comprehend life and health insurance. Life insurance acts as a safety net for your family's finances in the event of your death. Such plans include death benefits, implying that your nominee will receive the amount assured or the promised money in the event of your untimely death. Life insurance is essential for you if you are the only provider for your family. The money your insurance company pays to your family can cover short-term expenses like your child's education or marriage and long-term ones like those. It may also be employed to pay off debt. The goal is to make sure your family has enough financial security so they won't struggle in your absence in their life.

Health insurance, on the other hand, covers all of your medical costs if your health deteriorates and you require treatment. These pay for the price of prescription drugs, diagnostic tests, hospital stays, surgeries, and other medical procedures. When treatment costs rise daily, the goal is to give you the financial flexibility to pay for high-quality care.

Life Insurance and Health Insurance Have Different Characteristics

Life Insurance

  • It is a lifetime comprehensive insurance policy that provides total protection. When the policyholder dies, your beneficiary receives a payout.
  • Depending on the policy selected, fixed and flexible premiums are offered. There are additional investment plans accessible.
  • It's a long-term policy.
  • Life insurance is typically for a set tenure. Usually, it is cancelled after the insurance's term is up.
  • It has a set duration and often ends when the policy expires.
  • When the policyholder passes away, the family and dependents are financially protected.
  • At the end of the insurance period, survival and death benefits are offered.

Health Insurance

  • These are health needs covered by medical insurance. Nothing else is covered besides medical costs.
  • Only fixed premiums are offered. The issue here is not an investment. The motive of this plan is to protect your health and medical costs. You cannot health insurance claim a bonus here.
  • It's a short-term policy.
  • The term of this form of insurance is not specified. In most cases, the insured renews the policy annually to keep its protective coverage.
  • Since the policy is typically renewed yearly, the policyholder continues to get health protection.
  • With this, your family is covered, and it covers all of your future medical costs.
  • There are no benefits for survival and death here, but your medical requirements and hospitalisation are covered.

Classifying Life Insurance

Whole Life Insurance - This has fixed premium payouts, and the beneficiary's sum assured is typically fixed and tax-free. Considering the low-risk strategy, it is less expensive insurance than universal life insurance. Such a policy may be used as collateral for a loan.

Universal Life Insurance - Universal life insurance is often referred to as an investment policy offering the investor a death benefit. Parts of flexible premium payouts are reinvested to increase the cash value of the sum insured. ULI is more expensive than whole life insurance because of higher returns and added risk. As a result, the premiums offered here are adjustable, as are the death benefits.

Classifying Health Insurance

Individual Health Insurance - As the name implies, a single person is covered by individual health insurance. It is used to pay for illnesses, accidents, hospitalisation, and unexpected medical needs that may arise over one's lifetime. Additionally, individual health insurance covers things like critical illness coverage, OPD costs, and maternity benefits.

Family Floater Plan - Family floater health insurance covers everyone in the household for a single premium. It covers any medical costs that may occur over our lives, including sickness, accidents, hospitalisation, and other charges. 

Senior Citizen Health Insurance Policy - Senior citizen health insurance policy is  intended for people over 60. Thus, "Senior Citizens" was coined. This was explicitly designed with 60+ citizens' diverse physical and psychological demands in mind. 

Life Insurance vs. Health Insurance 

FeaturesLife InsuranceHealth insurance
Why Should You Invest Here?In the event of your untimely passing, your family is financially secure.Medical costs are soaring, but if you have health insurance, you won't have to dig deep into your wallet in an emergency.
The Main BenefitThe beneficiary of the demised receives the promised amount.All of your medical costs, subject to the maximum coverage and other restrictions, are covered.
Extra AdvantagesThe cover policy can be supplemented with a variety of benefits. Such as rewards for maturity, rewards for surrender, loyalty bonuses, etc.Free physicals are included in some policies. Some policies permit the addition of the no-claims bonus.
Various Cover Types

1. Individual cover

2. Group cover

1. Individual

2. Family

3. Group coverage

Variety of PlansTerm plans, savings, a child's future (creating wealth), retirement, etc.Plans that cover critical illnesses, comprehensive health insurance, etc.
The Tax BenefitsUnder Section 80C, Section 10(10D) of the Income Tax ActUnder Section 80D of the Income Tax Act


Both life insurance and health insurance are fundamental financial necessities. However, choosing a suitable cover for both is simpler if you consider your health, obligations, age, profession, and other variables.

Read more -


1. What distinguishes life insurance from health insurance?

Health insurance is intended to cover the cost of medical care, prescription medications, and annual checkups for you and any other people covered by your plan. In addition, if you pass away while the policy is in effect, your loved ones will receive a cash payout from your life insurance.

2. Is life insurance still necessary after you retire?

There is no universal solution. You probably don't need life insurance if, after retirement, you have no trouble making ends meet, your kids can support themselves, and you don't have any debt.

3. Life insurance or term insurance: which is preferable?

In the unfortunate event that the insured person passes away within the policy's term, the term insurance pays out a predetermined amount to the insured's nominee. The insured will not receive any money if he lives out the term. Contrarily, life insurance pays out in full in death and maturity scenarios.

4. What purposes does life insurance serve?

You can use it in various ways, including as additional retirement income through tax-advantaged loans taken against your policy's cash value. In addition, indexed and variable permanent insurance plans are frequently utilised in income planning.

5. Why might life insurance not pay you the sum?

The insurance company can choose not to pay the death benefit if you lie on your insurance application about any risky hobbies, health issues, vacation plans, or your family's medical history.

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