Health Insurance vs Term Insurance
- Types of health plans
- Benefits of health & term insurance
- Types of term plans
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.
| 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. |
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.
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.
Health insurance in India comes with the following kinds of policies that cater to different requirements of different individuals:
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.
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.
Term insurance comes in the following variants in India:
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 |
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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Naval Goel is the CEO & founder of PolicyX.com. Naval has an expertise in the insurance sector and has professional experience of more than a decade in the Industry and has worked in companies like AIG, New York doing valuation of insurance subsidiaries. He is also an Associate Member of the Indian Institute of Insurance, Pune. He has been authorized by IRDAI to act as a Principal Officer of PolicyX.com Insurance Web Aggregator.
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