Life insurance and health insurance have become commonplace for people of all ages nowadays. Both play an important role in providing you and your family with a financial safety net in the event of a life-altering medical condition that may make you unable to work or in the event of your death in which case your family needs to be taken care of. In today’s scenario, even young people are finding themselves responsible for their family’s income. With this being the case all too often, the need for insurance becomes paramount. Before investing one’s time and money in any kind of insurance, however, you need to first be aware of the key differences between life insurance and health insurance.
Life Insurance: Get Coverage for the Long-Run
Life insurance is exactly what it sounds like, an insurance policy is taken out against an individual’s life or more specifically, in the event of their death. This financial safety net allows the nominees, which could be your family members, to retain certain benefits and a financial cushion in the event of your death. The death benefits in the majority of cases are income-tax-free policies. Therefore, the sum amount reaches the intended recipients without much, if not, any deductions. It helps to think of it as a fool-proof future plan that covers you for the rest of your life. The overall concept here is that this type of insurance is a long-term plan.
In life insurance, there are two broad categories which are ‘whole life insurance’ and ‘universal life insurance’.
1) Whole Life Insurance: This type of insurance is less expensive and comes at a fixed sum. It is also tax-free in most cases when providing the payout. It is considered a low– to no risk approach as opposed to other forms of insurance.
2) Universal Life Insurance: A universal policy performs the same functions of providing nominees a payout upon the individual’s death but can be viewed as an investment as well. The premium payout is more flexible and part of the payment is invested to add more cash-value. Due to the nature of investing a portion for higher returns, this is considered riskier and more expensive.
Understanding Health Insurance
As opposed to the long-term nature of life insurance, health insurance is a short-term plan. It serves the purpose of covering one’s immediate medical needs and bills in the event of certain types of illnesses or emergency procedures. The insured person pays a fixed premium for their own or their family’s health cover. Through this kind of policy, you can either get a reimbursement for your medical expenses or have the company payout directly to the facility to cover you. It can even extend towards the coverage of prescription medication. Unlike life insurance, health insurance comes with no death benefits or survival payouts, and no amount is refunded at the end of the policy term.
In terms of the types of health insurance, there are three broad coverage areas – ‘Individual Health Insurance’, ‘Family Floater Health Insurance’ and ‘Senior Citizen Health Insurance’.
1) Individual Health Insurance: This type of insurance is for one’s personal coverage. It covers your own medical expenses such as treatments, medication, procedures and so on. It also carries additional benefits such as Maternity Benefits, OPD expenses, Critical Illness Cover and so on.
2) Family Floater Health Insurance: This can be taken out as a policy coverage for your entire family. Think of it as group insurance. Every family member or certain family members can be covered under a single policy. Other than that, it provides the same set of coverage benefits as a run-of-the-mill health insurance policy.
3) Senior Citizen Health Insurance: It works as the name suggests. It provides coverage to people over the age of 60, who can be classified as senior citizens. It is customized in such a way that it functions by keeping in mind the ailments that are most common amongst seniors, as well as whatever specific chronic ailments, that person might have developed. It covers various physical and psychological needs as well as things such as Domiciliary Care, AYUSH, Organ Donations expenses, and Critical Illnesses to name a few.