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 Difference between health insurance and term insurance

What is health insurance?

Health insurance is a medical insurance cover which offers you financial assistance by covering your medical expenses. 

In the current scenario, the hospitalization charges are constantly increasing due to rapid medical inflation. Moreover, people are getting affected by lifestyle diseases which leads to hospitalization.

Health Insurance

Source: Apollo Munich Insurance

Hence, it becomes necessary to sign up for a health insurance plan to keep the out-of-pocket medical expenses at bay.

Also read: Corona kavach policy-All you need to know

What is term insurance?

Term insurance

Source: The Financial Express

Term insurance is a life insurance policy that offers comprehensive financial protection to your dependent family members during your absence. 

So, depending on your term insurance policy, your family member or your nominee will receive a life cover (sum assured) in case of your sudden demise. 

Hence, if you wish to take care of your family’s financial needs even if you are not present, then term insurance is your answer.

Types of term insurance policies

Some of the term insurance policies are

1. Level term insurance plan

In this term insurance policy, the sum assured remains unchanged during the entire policy term. The sum assured is paid to the nominee after the demise of the policyholder.

2. Term insurance with return of premium

Also known as TROP, is a term insurance variant where the premium paid towards it is refunded if the policyholder survives the entire term period. Moreover, this refund is tax free.

3. Term plan with riders

In this term insurance plan you can opt for additional coverage benefits apart from the sum assured. This can be critical illness rider benefit, premium waiver,  etc. This will reinforce your basic term insurance coverage.

4. Increasing term insurance

In this plan, the sum assured can be increased every year. On the other hand, the premium remains unchanged or might increase with every passing year.

5. Decreasing term insurance

In decreasing term insurance, a fixed percentage of sum assured decreases every year. The premium paid towards this policy remains the same but the risk coverage may reduce.

6. Convertible term insurance plans

In this the policyholder can convert the plan into a whole life insurance or an endowment insurance plan. This is usually done by paying extra premium. 

Types of health insurance policies

Here are some of the types of medical health insurance policies

1. Individual health insurance 

In an individual health insurance plan, the health insurance coverage goes to a single person, that is the policyholder. They pay the premium to avail the health insurance benefits.

2. Family floater policy

Family floater policy is a health insurance policy where the coverage is offered to an individual and he/she extends the coverage to their dependent family members. For example, when an individual signs up for a family floater policy, he/she can include spouse, children and parents under a single sum assured.

3. Group health insurance policy

In a group health insurance policy, the employer or the organization provides health insurance for its employees and their dependent family members. In this case, the company pays the premium towards the insurance plan on behalf of the employees.

4. Top-up health insurance plans

Top-up health insurance plan is an add-on to your current insurance plan. In this you can extend your sum assured by paying extra. This extra money paid is in addition to the premium paid annually. This plan can be of great use in case you exhaust your sum assured.

5. Health insurance for senior citizens

This is the health insurance plan for senior citizens who are above 60 years of age. In the health insurance plan for senior citizens the premium paid is usually high. In this policy, one has to usually opt for co-pay

Also read: How to compare two health insurance plans

Benefits of term insurance plan

There are several benefits of a term insurance plan. A few are

  • Generally, in a term insurance plan the premium paid is usually lesser than a premium paid towards the health insurance plan.
  • Even though you pay a lesser premium, this plan offers larger life covers (sum assured).
  • It ensures that your family gets financial protection during your absence.
  • Term insurance plans also let you reap the tax benefits for the premium you pay towards it.

Benefits of health insurance plan

Depending upon the health insurance plan you opt for, there are several benefits of a health insurance plan. They are

  • When you opt for a health insurance plan, it basically covers your pre and post-hospitalization charges. Hence, it offers solid protection against your medical bills upto the sum insured.
  • Some health insurance plans offer you maternity benefits, or it can be even added to your existing plan. This offers you coverage on delivery expenses and even covers the newborn.
  • Moreover, some health insurance plans offer you free medical check-ups each year as you renew your policy.
  • Additionally, your health insurance plan offers you tax benefits for the premium you pay towards it. This applies for both individual and family floater policies.

Summary: Health Insurance vs Term Insurance

Health Insurance vs Term Insurance

Source: The Financial Express

Hence, we can summarize the difference between health insurance and term insurance as follows.

Health insurance 

Term insurance

It offers protection against the unexpected medical and hospitalization expenses. It offers financial protection to your family in your absence (sudden demise of the policyholder)
The sum insured is spent on the policyholder in case of hospitalization. If the dependent family members are covered under the health insurance plan, then the sum insured is spent on them too. The nominee of the policyholder receives the sum insured if the insured is no more.
The premium paid is higher. It usually depends on the age of the oldest family member insured. The premium paid is usually lesser than that of health insurance.
The premiums are paid every year. The premiums are paid every year.

 

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