Health Insurance vs Term Insurance
Types of health plans
Benefits of health & term insurance
Types of term plans
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Updated on Jul 09, 2025 4 min read
Term Insurance Vs Health Insurance
There are different types of insurance plans in India that serve different purposes. Health insurance and term insurance plans are one of them. The major difference between term insurance and health insurance can be depicted by the fact that term insurance provides a sum assured i.e. an amount which goes to the nominee chosen by the policyholder when the policyholder dies. It is an assured amount that the insurance company promises to pay at the commencement of the policy. Health insurance on the other hand works differently. The insurer provides a sum insured on an yearly basis and your medical bills exhaust this sum insured as they arrive when you fall sick or get hospitalized. Let’s dive a little deeper to understand the difference between health insurance and term insurance.
Difference Between Term Insurance and Health Insurance Plans at a Glance
| Term Insurance | Health Insurance |
| It offers financial protection to the family of the policyholders. | It covers the medical expenses of the policyholders. |
| It provides a one-time fixed amount to the nominee in case of the insured demise within the policy tenure. | The sum insured amount is paid to the insured person to be able to pay for hospitalization expenses in case of an accident, illness, or injury. |
| Policy premium is less. | The premium is charged on the basis of services taken. |
| The premium is paid annually, quarterly, half-yearly, monthly. | The premium is paid annually, quarterly, half-yearly, monthly. |
| If the policyholder survives the policy tenure of the term insurance and chooses a TROP plan, the insurer will refund the premiums paid to the policyholders. | There is a ’No-Claim-Bonus’ benefit for not filing a claim during the policy period. |
| Waiver of premium, critical illness rider, accidental death, and permanent disability are the riders offered under Term Insurance. | There are various rider benefits are offered under health insurance such as critical illness cover, worldwide treatment cover, maternity cover, etc. |
What is Health Insurance?
Health Insurance is a contract between the insurance companies and the insured person that an insurance company will cover the cost of the medical expenses of the insured person in exchange for a fixed premium. This policy can be purchased for an individual or a family, and it can be used to get proper medical care in case of an emergency or even a planned medical procedure without any fear of financial consequences.
What is the Need for Health Insurance?
The rising cost of healthcare expenditure every year is a matter of worry for everyone, no matter how much you take care of yourself, medical emergencies can strike at any time and can put your finances under a lot of stress. In such cases, it is wise to buy a health insurance plan with an adequate sum insured amount. Having health insurance assures you that you will receive much-needed financial assistance in case of a medical emergency. Moreover, a health insurance plan covers not only hospital charges and costs, but also pre-and post-hospitalization expenses.
Types of Health Insurance Plans
Health insurance in India comes with the following kinds of policies that cater to different requirements of different individuals:
- Individual Health Insurance
It provides coverage only for the insured person’s medical expenses in return for insurance premiums. The individual cannot add anyone else in this kind of insurance policy. - Family Floater Health Insurance
This covers the entire family under a single policy. The policyholder can add his spouse, children, parents and sometimes up to 16-20 extended family members to this kind of policy which depends completely on the options provided by the insurer. - Group Health Insurance
Under the category group health insurance, usually an employer or a group provides health insurance to its employees or members. These policies come with affordable premiums which are paid by the employer only. - Senior Citizens Health Insurance
This health insurance is designed for the individuals who are above the age of 65, providing coverage for age-related illness and they have a higher premium as compared to other types of health insurance. - Maternity Health Insurance
This health insurance covers medical expenses related to pregnancy and childbirth. It also covers pre and postnatal care, including consultations, and hospitalization, it sometimes includes newborn coverage. - Critical Illness Insurance
Provides coverage for life-threatening diseases by paying a lump sum amount upon diagnosis to cover medical expenses for the treatment or even for other financial obligations. - Top-Up Health Insurance
This acts as a supplement to the existing health insurance plan, by providing an extra sum insured when you’ve used up your sum insured.
What is Term Insurance?
Term Insurance is a type of insurance that provides financial compensation to the nominee of the insured in case of the unexpected death of the policyholder. Term insurance covers your family’s financial needs even when you are not around. It is a type of life insurance that provides financial protection to the insured’s beneficiary or nominee.
What is the Need for Term Insurance?
When compared to all other insurance plans, term plans have the lowest premiums. The benefits of a term insurance policy can be used to pay off any debts you may have accumulated, pay for funeral expenses, cover the costs of your children’s education, and replace the future income that your family would still require to live comfortably.
Thus, if you purchase term insurance when you are still young and healthy, you and your family will be protected from any unexpected events. Term insurance is a necessity that should be included in everyone’s insurance portfolio.
Types of Term Insurance Policies
Term insurance comes in the following variants in India:
- Level Term Insurance Plan
In this type of term insurance, the sum assured remains constant throughout the policy term. - Term Return of Premium Plans (TRoP)
TRoPs return back the total premiums after the deduction of taxes, that are paid by the policyholder if he/she outlives the policy term. TRoPs are relatively costly. - Increasing Term Insurance Plans
The term insurance plan where the sum assured is dynamic, it keeps changing with the change in financial needs of the insured or inflation in the market - Decreasing Term Insurance Plans
It is a term insurance where the sum assured decreases over time, these plans are used to cover loans or mortgages. - Convertible Term Insurance Plans
This term insurance plan allows the policyholder to change the term insurance plans into life insurance plans at a later stage of his life. - Term Insurance Plans with Riders
These plans come with a choice to opt for additional optional benefits to the base term insurance plan called riders. For example critical illness rider, accidental death benefits rider, total and permanent disability rider etc. - Zero Cost Term Insurance
Zero cost term insurance comes with the option to withdraw the term insurance policy before the completion of the policy tenure wherein, the insurance company deducts the pre-announced taxes and pays back the premiums paid. This policy doesn’t come with costly premiums like that of TRoPs and gives the option of discontinuing once the policyholder feels that all of his liabilities are paid and he might not require the policy in the future.
Benefits of Health Insurance and Term Insurance Plans
Term and Health Insurance are totally different from one other since their fundamental base properties are dissimilar. But they both have many benefits, let’s see a few benefits of the plans:
| Benefits | Health Insurance | Term Insurance |
| Financial Protection | It covers medical expenses and hospitalization. | It provides financial security to the dependents. |
| Coverage | Includes treatments, surgeries, and medications. | Provides death benefits only. |
| Policy Term | Usually renewed yearly. | Coverage for a specified term (such as 10, 20, or 30 years) |
| Premium Payments | Usually premiums are paid on an quarterly, half yearly and yearly basis. | Premiums come with payment flexibility under many plans. |
| Policy Payout | Reimbursement for medical expenses or cashless treatment at network hospitals. | Lump-sum payout to beneficiaries in case of the insured’s demise. Some plans comes with monthly payments too as a regular income benefit. |
| Riders/Add-ons | Additional coverage options (e.g., critical illness, maternity, etc.) available through riders. | Riders available for enhanced coverage (e.g., accidental death, disability, etc.) |
| Tax Benefits | Premiums paid are eligible for tax deductions under Section 80D of the Income Tax Act. | Premiums paid are eligible for tax deductions under Section 80C of the Income Tax Act |
| Customization | Different plans available to suit individual/family needs. | Coverage amount and policy term can be chosen as per requirements. |
| Health Check-ups | Some policies offer free or discounted health check-ups. | NA |
| Cash Value/Returns | No cash value or returns upon policy maturity. | NA |
Conclusion
Term insurance and health insurance are two of the most important types of insurance plans, and both have their own set of benefits. This is why both term and health insurance should be a part of your financial portfolio. Term insurance provides financial assistance to your designated beneficiaries in case of your death, health insurance is designed to cover medical expenses incurred as a result of hospitalization and/or serious illnesses. So, If you carefully read the benefits of both types, you will realize that you should buy both policies at some point in the future. It is better to make the right decision at the appropriate time before it’s too late.
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Health Insurance vs Term Insurance: FAQs
1. For health insurance vs term insurance, which one has the lower premium?
The cost of term insurance is cheaper than the cost of health insurance.
2. What is the main difference between term life insurance and health insurance?
The key difference between term insurance and health insurance is that term insurance pays the premium amount to the beneficiary after the death of the policyholder, whereas health insurance pays for the medical expenses of the policyholder.
3. What is the difference between health insurance and term insurance in terms of premium payment terms?
There is no difference between the policy payment term of both types of insurance policy. Both of them are subject to on a quarterly, half-yearly and yearly payment basis.
4. What is the difference between term life insurance and health insurance in terms of riders?
Term and health insurance both come with riders, which provide add-on benefits to the policyholder.
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Written By: Simran Kaur Vij
Simran is an insurance expert with more than 4 years of experience in the industry. An expert with previous experience in BFSI, Ed-tech, and insurance, she proactively helps her readers stay on par with all the latest Insurance industry developments.
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