Comparison: Health Insurance v/s Term Insurance
Updated On Apr 27, 2021
Nowadays, the cost of medical expenses is sky-high, and as the recent pandemic of Covid-19 has shown, it is extremely important for us to have sufficient medical and financial backup. In India, the rising exchequer of medical costs demands health insurance and term insurance coverage for most people. But both of these terms do not imply the same meaning and there is a difference between the two. In this article, we are going to look at what makes a health insurance policy different from term insurance and what their types are.
Let us begin by first understanding the meaning of these terms as follows -
1. Health Insurance -
A health insurance policy provides you with financial coverage that reimburses your healthcare expenses. It is a sensible and much needed insurance cover in old age when you are more susceptible to physical ailments and are in need of funds to augment your medical diagnosis and treatment. A health insurance policy aids you in such a situation by paying for your medical, surgical, consultation, and other charges incurred by you. In some cases, it also covers certain specific physical ailments and disabilities arising out of it. Hence, health insurances are tailored to incorporate a wide array of medical conditions and provide you an insurance cover accordingly.
2. Term Insurance -
A term insurance policy provides you with lifelong coverage and financially secures the future of your dependents and loved ones in the face of unforeseen circumstances. It is an accepted fact that it might not always be possible for you to be there for your dependants. In such a scenario, a term insurance policy aids you by providing coverage for a pre-defined period of time at a fixed rate of payments. If you were to meet with an untimely and unfortunate death, your nominee would receive the death benefit under your term insurance coverage and be relieved of any financial trauma or distress. Hence, term insurance policies are specifically designed to offer financial security to your loved ones and ensure that they do not compromise in living their lives.
Let us now look at the differences between these 2 insurance policies in the table below -
|
Point of Difference |
Health Insurance Policy |
Term Insurance Policy |
|
Coverage |
A health insurance policy covers an individual as well as collective members of a family depending upon the number of insured members. It includes pre and post-hospitalization charges, procedural expenses, and domiciliary hospitalization under some plans. |
A term insurance policy covers the dependants or family members of the policyholder. |
|
Sum Insured Payment |
In a health insurance policy, the sum insured is paid to the life assured as reimbursement for suffering from any particular kind of illness or disability resulting from it, hospitalization charges, medical consultation and treatment charges. |
In a term insurance plan, the sum insured is paid to the nominee of the policyholder only on the occasion of the policyholder’s death. |
|
Premium Amounts |
Health insurance policies generally have a low premium amount. |
Term insurance policies have a comparatively higher rate of premium. |
|
Premium Refund |
Health insurance policies do not have a premium refund option. However, they have a No-claim-bonus (NCB) benefit that can be received at the end of the policy tenure for not filing any health claims during the policy period. |
Term insurance policies have a premium refund option by which the insurer refunds the premiums paid by them if the policyholder survives the entire tenure of the policy. |
|
Rider Benefits |
Health insurance policies come with rider benefits such as maternity cover, critical illness cover, and disability cover. |
Term insurance policies come with rider benefits such as a waiver of premium, critical illness rider and accidental death and permanent disability rider. |
Now that the basic differences in the structure, coverage, premium amount, and benefits of health and term insurance are laid out, let us have a look at the different health and term insurances available in the market -
A. Types of Health Insurances -
Anyone can buy a health insurance policy but there are many options and types to choose from so that you get the policy most accurately suited for your medical needs and requirements. The following is a list of the different kind of health insurances -
- Individual Health Insurance - It provides coverage for only one individual.
- Family Floater Health Insurance - It provides coverage for the individual policyholder as well as for the different members of their family whom they can include such as spouses, children, and parents.
- Senior Citizen Health Insurance - It provides medical cover for people who are above the age of 60 years.
- Group Health Insurance - It is a health insurance policy offered by a company to its employees.
- Critical Illness Health Insurance - It provides health insurance cover for the cost of treatment of diseases like renal disorder, cardiovascular disorder, cancer among others.
- Top-Up Health Insurance Plans- This option can be bought independently of any other insurance policy and is usually purchased as it offers additional coverage beyond the sum assured limit of your standing health policy and is useful as an additional source of funds if you were to cross the upper limit of your base health insurance policy.
B. Types of Term Insurances -
- Level Term Insurance Plan - In this kind of term insurance, the sum assured remains the same throughout the policy term.
- Term Insurance with Return of Premium (TROP) - It allows for the refund of all premiums paid by the policyholder if they survive the entire period of the policy tenure.
- Convertible Term Plan - It allows the policyholder to convert their term plans to an endowment or a whole life insurance plan.
- Increasing Term Plan - In this option, the amount of sum assured increases every year but the premium amount remains unchanged.
- Decreasing Term Plan - In this option, the sum assured reduces by every year and is a useful appendage in case you have a loan or mortgage to be paid off.
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These are the different types of health insurance and term insurance plans. It is now clear that both health insurance and term insurance are an indispensable part of our lives, but cater to the different conditions and requirements of us all. Hopefully, the differences laid out above and the different types mentioned will inform you and aid you in selecting health insurance or a term insurance policy as per your financial and medical requirements. It is always better to make an informed choice rather than making any hasty decisions.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.
