Difference between health insurance and life insurance

The meaning of insurance is to protect against risk. It is a kind of contract between the insured and the insurance company. In every type of insurance, we have to pay a premium (a fixed amount as per the specified terms) to the insurance company at the interval of a fixed period. The insurance is chosen based on many factors, but especially keeping one’s dependents (people who depend on us) in mind. Life insurance and health insurance both cater to different needs.

Life Insurance: Simply put, life insurance is the insurance of your life. That is, if something happens to you, then the sum insured, which you have decided at the time of choosing the policy, is given to your family. Not only this, if you survive till the end of the policy term, then you receive the sum insured. For example, if you have got life insurance of 20 lakh sum-insured and you die before the completion of the policy term, then the insurance company will give this amount of 20 lakh rupees to your nominee. With the death of the insured, the premium payment also stops. If you survive even after the completion of the policy term, the entire sum-insured amount, along with the bonus and other benefits, is returned to you.

Health Insurance: Health insurance covers only and only your health needs. In this, no amount is returned at the end of the policy term or on the death of the policy holder. Under this policy, the insurance company bears the expenses incurred in the hospital in case of your falling ill, an accident etc. Not only this, but health insurance companies also cover pre and post hospitalization charges. If you like, you can take advantage of the cashless facilities at the network hospitals of the company or you can claim insurance later if you’re getting treatment in a non-network hospital. Under myUpchar Bima Plus, you can claim your insurance at great facilities for yourself by paying a minimum premium.

Below are a few aspects and how they differ in life and health insurance.

Whether you are taking a health insurance plan or a life insurance plan, both have low premiums at a young age. That is, the sooner you decide to take insurance, the less premium you will have to pay. In the case of life insurance, once the premium is fixed, you have to pay the same premium for the entire policy term. Whereas, in the case of health insurance, there is a marginal increase in the premium annually. Not only this but there is also a big increase in premium at the age of 40, 45, 50, 55 and 60. This is because as you age, it is believed that your chances of falling ill and getting injured also increase.

While you can buy a life insurance plan for a child as well, you should be at least 18 years of age to get health insurance. Young children can be included in the family health plan since they are not given individual health insurance. Generally, a life insurance plan is not given to a person above 50-55 years of age; whereas, even after 60 years of age, health insurance is easily available for the elderly at an additional premium. myUpchar Bima Plus insurance gives you coverage from 10 years to the age of 99 years and the premium charged for it is several times less than the plans offered by any leading health insurance company.

If you want to take a health insurance policy, then according to the information given by you, the insurance company decides whether to do a health checkup or not. If you take health insurance at an older age or at a very young age, the company may opt to get a health checkup done. However, it is not necessary that you have a health checkup as sometimes companies give you a health insurance plan without a checkup.

On the other hand, if we talk about life insurance, then a health checkup is usually not required for it. However, the company may refuse to give you life insurance if certain health conditions are known. In some cases, the company may offer a life insurance plan by charging an additional premium.

In health insurance, the company takes care of hospitalization, medicines, tests and other health-related requirements when the insured person falls ill. Whereas in life insurance, help is provided by giving the sum-insured amount to the family or nominee on the death of the insured.

For example, Rohit is the only earning member of the family. When Rohit falls ill, his health insurance company bears the cost of his treatment. If he dies during this time then the health insurance company will pay the hospital bill, but no extra help will be given to the family. If Rohit also had life insurance, the life insurance company would give the sum-insured amount to his family or nominee if he dies. If he survives the disease, then no help will be given to him or his family from the life insurance company.

If you are planning for your retirement, then you should take a life insurance policy that will give you a regular pension when you retire. While this facility is available in life insurance, you cannot buy a health insurance policy for old age in advance. If you have a health insurance policy then you have to pay the premium even after retirement or the policy will lapse. If you take a retirement policy at a young age, you will not have to depend on anyone once you retire. But for health policy, you have to pay the premium every year, so that you can also get good health care in case of a health emergency, even in your old age.

(Read more: Which is the cheapest health insurance)

Health insurance is an investment in your health. However, it is not a real investment. This policy can pay your hospital bill till sum-insured, only in case you fall ill. If you don't get sick, you get nothing in return. On the other hand, life insurance is also a type of investment. If the life insured dies during the policy term, then his/her nominee gets the sum insured. Whereas, if the life insured survives till the end of the policy term, i.e. till the maturity of the policy, he gets the benefit of sum assured. In this sum assured, you get the interest and bonus of 4-12% on the premium paid by you. If your life insurance policy is market-linked, i.e. U-lip, then you can also take advantage of the ups and downs of the stock market.

The premium you pay for a life insurance plan ensures that you are saving some amount of your income. After taking the policy, you may deposit this amount under compulsion but it does develop the habit of saving in you. Later on, when you will get this deposit in the form of a lump-sum amount (on maturity), then many of your tasks will be done easily. On the other hand, in health insurance, the money you pay as a premium comes in handy when you get sick or have an accident and you get proper treatment easily in the hospital. If the hospital bill comes within your sum-insured amount, then your illness doesn't affect your savings, which can remain untouched for worse times.

A life insurance policy can help you save tax. Paying tax means that you are legitimately sharing information about your income with the government. Every person, be it a salaried person or a person doing business, is liable to pay tax (if falling under the tax slabs prepared by the Income Tax Department of India) annually. Since tax is a burden for all, a premium of up to 1.5 lakh is exempted from 'tax deduction' (under section 80C), i.e. no tax will be levied on this amount. It is a good way to make a tax-free investment.

Health insurance premium offers tax benefits under section 80D of the Income Tax Act. Although the deduction limit varies with age, exemptions of up to Rs 25,000 can be availed under section 80D under 5.20, 20.8 and 31.2%. Apart from this, if you have taken a health insurance policy for your dependent parents also, then you get additional benefits in your tax returns.

Given the current situation, it is very common to face a sudden medical emergency. In our day-to-day lives, we often ignore our health, due to which the risk of getting dangerous diseases may increase. In case of a medical emergency, there is no other option but to bear the huge hospital bills. In such cases, your savings could get over in a jiffy. Therefore, health insurance is very important in today's era. If you want, you can take individual health insurance and can also consider family health insurance or a family floater for the whole family.

Life insurance covers life, not health. If you have life insurance but have not taken health insurance, then in case of a health emergency, you will have to pay the hospital bill from your savings. You may even have to surrender your life insurance policy to pay the hospital bill. Hence, in case of a medical emergency, your life insurance policy will not help you out.

Medical bills are skyrocketing; the better or more expensive the hospital, the sooner and harder will your pocket be affected. To keep yourself and your family safe in the event of a medical emergency, it’s best to get health insurance now. You can also invest in life insurance to meet your family’s future financial needs. Though there are better investment options nowadays, in case of your sudden demise, your family will get the benefit of the sum insured in life insurance.