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Choosing Life Insurance or Health Insurance - Which one is a wiser option?

Updated On Feb 16, 2021

Human life is an unprecedented journey where the unexpected can come up at any point in time. We need to be well prepared to face every unpredicted situation that comes up in our way. For this, what is required is complete preparation and mental strength.

To be precise, the two significant unexpected situations which can come up in our lives is death and health issues or illness. Both of these situations can turn our lives upside down if we are not prepared mentally and financially to face these situations. Your sudden demise can create financial and economic troubles for your dear ones whereas if you are suffering from a critical illness, then also it is a situation of financial emergency for your dear ones.

In both these situations, your saviour is an insurance policy, i.e. life insurance policy and a health insurance . A life insurance policy will take care of the financial needs of your family when you are longer with them, and a health insurance policy will take care of all expenses related to medical facilities in case of your illness. Both seem to be equally important in our lives; however, the dilemma arises if there has to be a choice made between life insurance and health insurance!!

What are Life Insurance and the need for a Life Insurance policy?

Life Insurance is an agreement or a contract between an insurance provider and the policyholder. According to this contract, the insurance provider guarantees the payment of a specified amount on the demise of the insured person. 

The primary reason for purchasing a life insurance policy is risk coverage. The insured person is provided with a high life risk coverage, which will keep your family and dear ones protected in case of occurrence of an unexpected event. Life insurance policy is a way to protect your assets in case of an unprecedented incident. Your assets might have been procured by a loan and loan re-payment would not be a problem with the sum assured amount obtained from life insurance in case of your sudden demise.

Insurance providers have come up with several plans on life insurance, which can act as wealth-creating tools like Unit Linked Insurance Plans (ULIPs) or as savings tool like Money-back plans. Moreover, many life insurance plans have provisions for pension plans which help in providing coverage for your expenditure after retirement. This is quite an important feature as it allows for financial security for your old age. Furthermore, life insurance policies also help in availing tax benefits as the premium paid for life insurance policies can be used to claim tax deductions.

These features mentioned above and benefits can make you feel that it is wiser to choose a life insurance policy over health insurance.

Health Insurance policy and the need for a health insurance policy

Health insurance policy is an agreement or a contract by which the insurance provider guarantees to cover the expenditure incurred due to the hospitalisation of the insured person. 

Health insurance policy is a basic necessity today due to the increasing lifestyle ailments among individuals and the inflating prices of medical facilities. A health insurance policy provides coverage for all necessary expenses during an illness of the person insured. 

Health insurance policy will cover the expenses of hospitalization, pre-hospitalization and post-hospitalization. Additional riders can be included in a general health insurance policy such as maternity benefits, neonatal care, home health care services, etc. Other expenses such as emergency ambulance services, domiciliary expense, expenses related to other alternative methods of treatment, etc. can be covered by the help of a health insurance policy. Moreover, the premium paid towards health insurance policy can be used to claim Income tax deductions.

These features of health insurance policy might also create an impression in your mind that choosing a health insurance policy over life insurance would be more advantageous.

You may also like to read Let's explore some hidden benefits of health insurance plans

Life Insurance and Health Insurance Policy- Both are essential

For an individual, life insurance and health insurance both are essential during the different phases of life.  Life cover is essential to provide financial stability to your family, especially when you have dependents, whereas health insurance is essential as medical emergencies can arise any time.

However, paying a premium for both at a time can be a challenging factor. As your responsibilities start increasing; it might start getting tougher, and you may consider dropping one to create a balance.

So, now the question arises how to maintain life insurance and a health insurance policy together?

The basic principle by which you can continue a life insurance and health insurance together is by making and implementing proper financial planning. The policies and investment tools you opt for should be planned in a way such that your long-term financial goals would be achieved and your present-day budget is also not hampered.

When you are planning to have life insurance and a health insurance policy both, you should make sure that you purchase only that much coverage which you require. If you are continuing your insurance policies based on this thumb rule, it would be comparatively less tough for you to manage your present-day finances. Moreover, you can plan to purchase a particular category of both life insurance and health insurance for a specific age group depending upon your basic requirements in that age. By this, your coverage would be maintained, and premium payment for both would not stand as a problem.

Let us have a look at the life insurance plans and health insurance plans you should purchase during different stages of your life according to the requirements during those stages.

oDuring the age group of 20-30

This age group is the best time to buy insurance policies as the insurance premium remains reasonable during this period. Health insurance premium remains low due to less susceptibility to health issues during this young age.  Also, term insurance can be purchased during this age to avoid financial emergencies and high premium as well. This age group is also ideal for including maternity cover in your health insurance plan.

You may also like to read Top health insurance plans available at low premiums

oDuring the age group of 30-40

Here, in this phase, you must have started your family and need to upgrade your individual health plan into a family floater plan which would cover your spouse, kids and even your parents. Also, you can add up a child plan to the term insurance plan which you already have. 

You may also like to read How family floater health insurance plans can deliver more for less

oDuring the age group of 40-50

In this age group, you can focus on wealth creation and buy plans which act as investment tools like ULIPs. You can also go ahead and invest in other life insurance plans for wealth creation. Also, you can increase your coverage for the health insurance plan by including additional riders and cover for critical illness. Moreover, the pension plan needs to be included in your portfolio for future requirements.

oDuring the age group of 50-60

If you have not planned for retirement, you can do that during this age by purchasing a pension plan. However, if your health insurance policy has got additional riders and coverage; then you can sit back and relax.

o60 years and above

By this age, you are already retired and can continue your term insurance plan and any other life insurance plans which you have already purchased. Also, you should opt for health insurance policies for senior citizens as the illnesses, and health-related problems will increase now onwards.

Hence, unexpected incidents come into our lives without any prior notice. Understanding your requirements and ideal financial planning will help us to overcome the contingencies. Life insurance cover and a health insurance policy both starting at a young age itself is your first step towards preparing yourself to face life.

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