Difference Between Term Insurance and Health Insurance Explained

We know your family means everything to you. You want to see them happy and independent, both when you’re around and even after you’re gone. That’s why having insurance is not just an option; it’s a necessity.

With various types of insurance available, choosing the right one for your loved ones is crucial. Term insurance provides financial protection for your family after your demise, while health insurance safeguards you from unexpected medical expenses.

But which one should you choose? Which is better? What are the benefits? Read on to find answers to all your questions about the difference between term insurance and health insurance.

In our fast-paced lives, we grow and we spend. The ever-growing standard of living means spending and bettering every day.

Most of our savings are limited to the first week of the month when our bank account shows our salary credit message. After paying the bills, what you are left with, is that enough for a rainy day? Sadly for most of us, the answer is no! 🙁

Health insurance is a type of general insurance that provides financial protection for you and your family when a health emergency arises.

Your family members are your world, you would do anything in your capacity to provide the best of the best to them. What happens to them after you are gone? Haunting but true.

You know you won't be there forever, but you can still take care of them… calming, isn’t it? 🙂 And the answer to your calm is Term insurance.

Term insurance provides your family with a death benefit in the event of your untimely death during the policy term is known as a life insurance term plan.

Your Term insurance will take care of your family’s financial needs even when you are not around. It is a life insurance plan that will give financial coverage to the beneficiary/nominee of the person insured.

When it comes to securing your future and safeguarding against life’s uncertainties, both health insurance and term insurance play pivotal roles. Both insurance policies come in various types for specific requirements.

Let’s know the different types of health insurance and term insurance policies and their unique offerings.

Types of Health Insurance Policies

There are different types of health insurance policies that provide coverage to everyone. We know one health insurance is never fit for all, and hence, there are seven different types of health plans to provide you with the desired coverage.

Let us discuss each of these plans:

1. Individual Health Insurance: As the name suggests, this insurance covers a single person. Individuals above the age of 18 can purchase this plan. This policy suits individuals who are unmarried and young.
2. Family Floater Policy: The entire family, including the insured, is covered under a single plan and the premium is paid annually. In this plan, the sum insured is split among all the family members. Know more about health insurance plans for families.
3. Senior Citizens Health Insurance: This Policy is for your ageing parents. From the best hospital and service tie-ups to covering the common treatments required in old age, we give the best to our customers. Know more about senior citizen health insurance plans.
4. Group Health Insurance: This insurance is designed for a group of employees working together. Sometimes, this insurance provides coverage to the families of an employee. It comes with a low-cost premium.
5. Health Insurance with Maternity Coverage: Maternity coverage can be bought as a rider along with the basic health insurance plan. This plan covers all expenses incurred during the prenatal, delivery, and postnatal stages.
6. Critical Illness Insurance: This insurance covers expenses incurred due to any life-threatening disease such as cancer, paralysis, heart attack, etc.
7. Top-Up Health Insurance: This health insurance policy provides an additional sum insured in health insurance and it comes with a deductible clause.

Types of Term Insurance Policies

Did you know there are different types of term insurance policies as well? Term insurance comes in various types, each designed to cater to specific needs and life goals. Understanding the types of term insurance policies will help you make an informed choice:

1. Level Term Insurance Plan: During the entire term, the sum assured is unchanged and is paid to the family after the insured’s demise.
2. Premium Refund Term insurance - If the term ends and the insured survives, the premiums are refunded tax-free.
3. Increasing Term Insurance: The death benefit increases each year through the term of the plan. With the increase in the sum assured the premium increases too.
4. Decreasing Term Insurance: The sum assured decreases by a fixed percentage every passing year, the premiums remain the same, but the risk cover is reduced.
5. Convertible Term Plan: The insured can convert the term plan to an endowment assurance plan by paying a little extra premium.

Understanding the benefits of a health insurance plan and a term insurance plan is crucial, as you will need these policies sooner or later in life. It is better to make a smart choice at the right time before it’s too late:

Benefits of Health Insurance Policy

Health insurance acts as a financial shield, covering medical expenses like hospitalization, treatments, surgeries and whatnot! Here are some of the major benefits of having a health insurance policy:

Benefits of Term Insurance Plans

Term insurance provides financial security to your family in case of your untimely demise. Not only this, it offers a high coverage amount at an affordable premium, ensuring your loved ones can maintain their lifestyle, pay off debts, or meet future goals. Here are some of the benefits of getting a term insurance policy.

• This is mainly your financial support to your family when you are absent from their lives.
• The premium charged is usually less and stays constant depending on the type of policy you have chosen.
• With term insurance comes tax benefits under section 80C of income tax. However, Tax savings should not be the reason for buying a term policy. This policy offers tax benefits and exemptions as per prevailing tax laws.
• You can include a rider benefit in your term insurance policy to increase its coverage. For this reason, the insurance companies give a range of riders.
• When one of the covered critical illnesses in your policy is diagnosed, you will get a lump sum payment if you have a critical illness rider added to your term insurance policy.
• The 'Return of Premium' option on a term insurance policy lets you get your premiums back if you outlast the policy's term.

You will eventually realize the necessity of both health and term insurance if you evaluate their benefits. Even if they have different functions in terms of offering financial assistance in various situations, you should consider choosing both of them rather than just one to give your family and yourself complete financial security. Therefore, making an informed choice early on before it is too late is preferable.

While both serve critical purposes in life, they cater to entirely different needs. Here are certain factors by which you can decide:

• Deciding on the terms of your and your family's needs.
• Prioritise and distribute your age to buy health insurance at a young age and term insurance if you start your family.
• Plan to purchase a plan based on your financial budget. Decide on the premiums and sum insured; it will be better to begin with something. 

Ideally, you should have both health insurance and term insurance to ensure comprehensive financial protection. Start by evaluating your current financial situation, liabilities, and family needs to strike the right balance.

Be smart and plan things before it’s too late.