Individuals who understand the importance of insurance know that a health insurance policy and a life insurance policy are the most important requirements in an individual’s financial portfolio.
However, many individuals perceive health and life insurance plans to be synonymous. They believe that if they invest in one, they don’t need the other. This belief is wrong.
Health insurance policies and life insurance policies are completely different from one another. They have different coverage benefits, pay different types of claims, have different premiums and also fulfil different financial needs of individuals. Here are some of the major differences between health and life insurance policies –
Life insurance covers the risk of living too long as well as dying too early. While most of the life insurance policies cover the risk of premature death, pension plans cover the risk of living too long. Health insurance, on the other hand, covers the risk of sickness. The risks of premature death or living too long are not covered in health insurance.
•Incidence of claims
In life insurance, claims occur either when the term of the plan comes to an end and the insured is alive or if the insured dies during the term of the plan. No claim is paid in case of medical sickness. Health insurance plans, on the other hand, pay a claim only when the insured suffers a medical contingency and seeks medical assistance.
Health insurance is a type of general insurance policy. As such, the principle of indemnity is applicable in most health insurance plans. Under this principle, the actual costs incurred on medical treatments are paid as claim, not the full sum insured. Life insurance plans do not follow the principle of indemnity. The sum assured is paid in lump sum on maturity or death.
Health insurance plans come with a term of one year to a maximum of three years. Life insurance plans, however, have a longer tenure. They come with terms which can cover an individual’s whole life.
Life insurance plans cover the risk of only one individual. In joint life plans, however, two or more individuals can be covered under the same policy if they are a married couple or business partners. In family floater health plans, however, all the family members can be covered under the same plan. The plan pays a claim if any covered member faces a medical contingency.
So, these points are the primary differentiating pointers in life and health insurance plans. Life and health insurance plans are fundamentally different and should not be equalised with one another.
However, both these plans are an important requirement and should feature in your financial portfolio. In terms of life insurance, a term life insurance plan is a must while in case of health insurance a family floater plan covering your whole family should be taken.
If you are wondering why the need of life and health insurance, here are some reasons for you to consider –
Why term life is needed?
•The plan provides an optimal coverage at affordable levels. You can, therefore, secure your family’s finances in your absence
•The plan pays a lump sum benefit in case of your premature demise. This benefit gives your family the much needed financial support for meeting their financial obligations.
Why health plans are needed?
•Medical costs have become unaffordable for the common man. A health insurance plan helps take care of these high medical costs and spares you the financial burden
•Ailments and diseases have also increased in recent times. Meeting the costs of treating them is possible only through health insurance plans.
So, understand the basic differences between life and health insurance plans and choose to invest in each for a secured financial future.