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Life insurance vs health insurance – which one do you prefer

Life insurance vs health insurance

As medical expenses continue to rise, many individuals are looking at life insurance or health insurance policies to cover unexpected costs. In this article, we want to compare these two types of popular insurance and explore their pros and cons.

Medical expenses are a huge financial burden for families today. The average cost per family member has gone up from $3,500 in 2000 to over $5,300 in 2018. This means that healthcare premiums have increased dramatically too. If you don't have proper financial protections in place, your family could be financially devastated if something bad happens.

While both life insurance and health insurance are critical components of a well-rounded financial plan, they also offer very different benefits. While each type of policy covers a unique benefit, each type offers certain advantages and disadvantages too. Read on to discover the differences between these two important types of financial protection but before that let's understand what is insurance?


An insurance plan is an agreement between an insurance company and a client. Clients buy insurance in hopes of protecting them from financial risks like losing money due to a natural disaster, an accident, or even a health problem. There are many types of insurance plans available out there - property, auto, life, etc. Each type of insurance has its own requirements and benefits. For example, if you're buying life insurance, you'll need to provide proof of your death, because this type of insurance pays out after someone passes away.

Types of Insurance

Nowadays everything offers you “insurance” (in some form) for your future. But here we're going to list eight major types of insurance that most people use.

  1. Life insurance.
  2. Health insurance.
  3. Motor insurance.
  4. Travel insurance.
  5. Property insurance.
  6. Mobile insurance.
  7. Cycle insurance.
  8. Bite-size insurance.

Life Insurance

Life Insurance covers death and disability benefits. The amount paid out depends on how old you are (the longer you live, the greater your benefit) as well as your health status.

"According to the latest Economic Survey released by the Ministry of Finance, only 3 people out of 100 have a life insurance policy in India. This figure stood at 2.82 in 2019."

Source: https://www.india.com

Types of Life Insurance Policies

Types of Life Insurance Policies

Here are 6 types of life insurance policies:-

1. Term Insurance Policy

A term insurance policy which is now also available as an E-term insurance policy is a complete risk cover policy that protects the insurer for a specific period. In this, a fixed sum of money called the sum assured is paid to the beneficiaries if the policyholder expires within the policy duration.

2.  Whole Life Policy

This covers a policyholder against death. The validity of this life insurance policy is not defined and hence the person enjoys the life cover throughout his/ her lifetime. The policyholder pays regular premiums until his death, upon which the sum is paid to the family.

3. Endowment Policy

This life insurance policy as they combine risk over and financial savings. Policyholders' advantages in two ways from a pure endowment insurance policy. In case of death during this period, the beneficiary gets the sum assured. If the individual survives the policy tenure, he/ she will get back the premiums paid with other investment returns and advantages like bonuses.

4. Money Back Policy

This life insurance policy is preferred by many people because it gives periodic payments during the term of the policy. In other words, a portion of the sum assured is paid out at regular mid intervals. If the policyholder survives the terms, he/ she gets the balance sum assured.

5. ULIPs

ULIPs are market-linked life insurance products that offer a combination of life cover and wealth creation options. 

6. Annuities and Pension

In these types of life insurance policies, the insurer agrees to pay the insured a stipulated sum of money durations. The purpose of an annuity is to protect against financial risks as well as provide money in the form of a pension at regular intervals. Thus, whatever your financial requirements, there is a wide variety of insurance policies to ensure that your needs are fulfilled.

Benefits of a Life Insurance Policy

1. Death Benefits: 

Life insurance enables individuals to protect themselves and their families, in case of any unfortunate death happening in the life of the insurer. The insurer pays an amount equivalent to the sum assured as specified in the contract along with applicable bonuses to the family.

2. Wealth Creation through Investment Components:

 In such a policy, you can invest your premiums in different funds based on your risk appetite. 

3. Financial Security: 

The primary importance of a life insurance policy is that it offers your family long-term financial security. 

4. Loan Option:

You can use your policy with the investment part for a loan as well. This Policy is like guaranteed savings plans, money back plans and whole life insurance policies that acquire a cash value over a period. You can borrow at a low rate of interest against this cash value if you want. 

5. Life Stage Planning:

The importance of policy grows as you progress through your life stages. Life stages refer to the multiple major stepping stones like marriage, childbirth, home purchase, retirement, etc. You can use life insurance plans to prepare for each of these life stages according to your preference.

6. Assured Income Benefit:

Assured Income benefit is another important benefit. Similarly, pension plans can offer a long-term guaranteed income to you and your spouse.

Health Insurance

Health Care Insurance pays out medical expenses related to accidents or illnesses. These expenses include doctor visits, hospital stays, prescription drugs, and other medical procedures. As long as you pay premiums, you can collect benefits for any condition that occurs within policy terms.

"Nearly 30% of the Indian population don't have any health insurance."

Source: https://economictimes.

Types of Health Insurance

7 Types of Health Insurance

Here 7 Types of Health Insurance Policies in India are available. 

1. Individual Health Insurance

An Individual Health Insurance is a kind of policy which you may buy to cover you, your spouse, children and parents. This type of insurance policy covers your medical expenses for injury & illnesses, any kind of surgery costs, hospital room rent, daycare procedures and many more. 

2. Family Floater Health Insurance

If you want an affordable health insurance policy for all the members of your family then Family Floater Health Insurance you should choose.

Single Sum Insured floats for all the members covered under the policy. You should not consider adding your family members who are above 60 years of age. They are more prone to illness and hence it will impact the premium cost. If you or the eldest member in the family is below 60 years of age, then you should buy a family floater policy.

3. Group Health Insurance

A Group Health Insurance policy is for a group of employees working together. So if you own a start-up or a corporate business, you should buy such insurance plans for your employees. Group Health Insurance Plan comes with a low-cost premium.

"According to the Mercer Marsh Benefits (MMB) Health Trends report surveys, in 2022, the cost of employer-sponsored medical benefits in India is predicted to rise by 15%."

Source: https://www.loophealth.com

Some insurance companies allow you to refill the sum insured, that too, for an unlimited period, if it is exhausted. This Plan covers employees for hospitalization due to accident, illness, critical illness, psychiatric illness, and maternity.

4. Senior Citizens Health Insurance

This health insurance policy is especially for senior citizens above the age of 60 years old. It offers coverage for the cost of medicines, hospitalization out of accident or illness, pre and post-hospitalization and treatment. Along with these, some other benefits like Domiciliary Hospitalization and Psychiatric benefits are also covered in this.

5. Maternity Health Insurance

This insurance covers all the expenses incurred in the prenatal stage, delivery and post-natal stage. Child delivery (including medically necessary terminations), infertility expenses and care coverage for the newborn baby up to its first 90 days. 

6. Critical Illness Insurance

The occurrence of lifestyle-related diseases is on the rise this health plan covers diseases like:

-    Cancer

  • Stroke

  • Kidney Failure

  • Paralysis

  • Coronary Artery Bypass Surgery

  • First heart attack

  • Pulmonary Arterial Hypertension

  • Multiple Sclerosis

  • Aorta Graft Surgery

The policy has lifetime renewability but then you should survive for 30 days after diagnosis of the illness.

7. Top-Up Health Insurance

This coverage is for higher amounts. But such plans come with a “Deductible Clause”. So, in case of a claim, the payment will be made over and above a defined limit mentioned in the policy plan.

Benefits of Health insurance Policy

Cashless Treatment: 

If you are insured, you can get a cashless treatment facility as your insurance company would work in collaboration with various hospital networks.

Pre and post-hospitalization cost coverage: 

It covers pre and post-hospitalization charges up to the duration of 60 days, depending on the insurance plans purchased.

Transportation Charges: 

The ambulance for the transportation of the insured.

No Claim Bonus (NCB): 

This is the bonus element which is paid to the insured if the insured does not file a claim for any treatment in the previous year of health issues.

Medical Checkup: 

Free health checkup is also provided by some insurers based on the previous (NCB) No Claim Bonus.

Room Rent: 

Covers hospital room expenses depending on the premium being paid by the insured.  

Tax Benefit: 

Premium paid on Health insurance is tax-deductible under section 80D of the Income Tax Act in the country.

Which is Better life insurance or health insurance?

Which is Better life insurance or health insurance?

Life insurance covers you if something happens to you, such as death. Health insurance covers you for medical problems, such as hospitalization.You should consider purchasing both types of coverage. This way, if something happens to you, either from illness or accident, your family will receive benefits. And if you need healthcare, both types of insurance can cover costs associated with medical treatment.


Nowadays, everything offers you "insurance" (in some form) to protect yourself against something bad happening in the future. Insurance plans require specific rules and regulations. Health insurance covers medical costs; life insurance pays out if you die. 

Both types of coverage will protect against financial losses associated with illness and death. The main differences between the two are who provides them and what they cover.

As an individual, you don't really need life insurance but if you have dependents who rely on you financially then it's worth considering. If you're looking to cover yourself against illness or injury then health insurance may be a better option.

FAQ's on Life insurance & health insurance:

Can I buy health insurance on my own?

Yes, it's possible to buy your own personal Health Insurance via your limited company. 

Difference between Health insurance and Medical insurance?

Health insurance offers extensive coverage for various health conditions. Medical insurance offers limited coverage for specific health emergencies and can be the extent of coverage in Medical Insurance is pre-defined and limited to specific injuries, accidents and illnesses.

Which is the No 1 health insurance in India?

HDFC ERGO Health Insurance (Formerly Apollo Munich Health Insurance) Apollo Munich, which is now HDFC ERGO Health Insurance is one of the most trusted brands with happy customers of 1.5+ crores comes first on the list. 

How do I choose health insurance in India?

  • Look for the right coverage.
  • Keep it affordable.
  • Prefer family over individual health plans.
  • Choose a plan with lifetime renewability. 

July 13


This was a fun article to read, I hope you enjoyed it.

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