Difference Between Health Insurance and Life Insurance
Updated On Apr 28, 2021
Life is not only beautiful but also uncertain, whatever you do however smart and hard you work, you are never sure what life has in store for you. Life Insurance is defined as a contract between the policyholder and the insurer, where the Insurance company pays a specific amount to the insured individual's family upon his death, It is a financial product that pays you or your dependents a sum of money either after a set period or upon your death as the case may be.
In legal terms, it is a contract in which the insurer promises to pay a pre-decided sum of money that is 'Sum Assured' upon the death of the insured person or after maturity of the plan.
Types of Life Insurance plans
Following are the different types of life insurance plans -
1. Term Plan
A term life insurance plan is very easy to understand, it has a simple structure with no complexity. You need to pay a premium to an Insurance company for a specific number of years and in return, in case you meet an untimely death, the insurer promises to pay the sum assured to your family, but it does not come with maturity benefit.
2. Whole Life Insurance Plan
A whole life Insurance policy gives you a cover for life, if the premium amount is paid regularly, the insurer promises to pay the sum assured to the nominee of the policyholder after the death of the policyholder. It includes saving components too.
3. Endowment Plan
In these kinds of plans, the insurer promises to pay the assured sum to the nominee in case of the untimely death of the policyholder. Meanwhile, if the policyholder survives the policy term, he/she would receive a lump sum amount as maturity benefit.
4. Money Back Plan
These plans are also a combination of protection and insurance, but the key advantage of this policy is that a portion of the sum assured is paid to you at a regular interval during the policy tenure, the remaining amount is paid at maturity
5. Unit Linked Insurance Plans
These plans are a combination of Investment and Insurance. The investments are made in debt and equities by the fund manager provided by the Insurance company, though there are no guaranteed returns.
What is Health Insurance?
Health Insurance is a type of insurance that covers medical expenses that arise due to an illness, such expenses include hospitalisation expenses, cost of medicines, or doctor consultation fees.
Types of Health Insurance Plans
1. Mediclaim Plans
These are the most basic types of health insurance plans, they cover the cost of treatment when you are admitted to the hospital. The Insurance company pays the amount according to the actual expenses incurred in the hospital by submitting original bills.
2. Critical Illness Insurance Plans
These plans cover specific life-threatening diseases, these diseases could require prolonged treatment or even a change in lifestyle. Unlike mediclaim plans, the payout is made on critical illness cover chosen by the customer and not on actual expenses incurred in the hospital.
Difference Between Life Insurance and Health Insurance
|
Basis |
Life Insurance |
Health Insurance |
|
Terminology Used |
In the case of Life Insurance, the insurer promises to pay the amount decided on the maturity or untimely death of the policyholder. This amount is known as ‘Sum Assured’. |
In the case of Health Insurance, the insurer promises to pay the amount decided while purchasing the plan at the time of a medical emergency. This amount is known as ‘Sum Insured’. |
|
Claim Amount |
In the case of Life Insurance, the policyholder can claim the whole amount that is the sum assured at maturity. |
While in the case of Health Insurance the policyholder can claim the amount only up to the expenses incurred in the hospital. |
|
Loss Assessment |
In the case of Life Insurance, there is no such loss assessment involved. |
In the case of Health Insurance, The company evaluates the amount of loss incurred and settles the claim accordingly. |
|
Premium Payable |
In the case of Life Insurance, the premium payable throughout the tenure of the insurance policy remains the same that is level premium throughout. |
In the case of Health Insurance, the amount of premium depends on the age band policyholder belongs to. With the increase in age, the amount of premium increases too. |
|
Insurable Amount |
In the case of Life Insurance, the insurable amount is decided by the insurer on the basis of the human life value of the individual. |
In the case of Health Insurance, there is no limit to an insurable amount as such it depends on the affordability of the policyholder. |
|
Area of Coverage |
The area of coverage in life insurance is usually worldwide. |
The area of coverage in Health Insurance is usually region-specific. |
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.
