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Difference between Life Insurance & Health Insurance

Difference Between Life Insurance and Health Insurance

Do you believe in planning for the future? If yes, purchasing Life and Health Insurance policies should be your next move. Let’s understand everything about these policies. There are major differences between life insurance and health insurance.

Difference between life insurance and health insurance:

Life insurance vs health insurance is best seen on a table as follows :

Life insurance Health insurance
It is a life time comprehensive coverage that offers complete insurance. It pays out to your beneficiary at the point of the policy holder’s death. These are medical coverage and covers health needs. It does not cover anything other than medical expenses.
Fixed and flexible premiums available depending on the choice of policy. Investment plans are also available. Only fixed premium available. Investment is not the concern here. Medical & Health protection is the motive of this plan. No claim bonus can be claimed here.
It is a long-term plan. It is a short-term plan.
Life insurance is generally for a fixed tenure. It normally is terminated once the tenure of the Insurance is over. The tenure of this kind of insurance is not fixed. Under normal circumstance, the insured renews the policy annually so he/she can continue to have the protection coverage it offers.
It is for a fixed tenure and it normally gets over with the expiry of the policy. The policy holder usually renews the policy annually and hence enjoys the health protection continuously.
The protection of the family and the dependants financially comes at the time of the demise of the policy holder. This covers you and your family and takes care of your medical expenses during your life.
This provides both survival and death benefits at the end of the insurance term. No survival and death benefits here but it looks after your medical needs and hospitalization.

What is Life Insurance?

The contractual agreement between a policy holder and the insurance company that promises to give the amount insured to the bereaved family after the demise of the policy holder.

There is no taxation on the amount received during the compensation to the beneficiary. Hence the total amount reaches the family without any deductions. Life Insurance is a cover for the entire family’s financial needs and future plans or investments.

Types of Life Insurance :

  • Type 1 : The Whole Life Insurance has fixed premium payouts and the sum assured to the beneficiary are generally tax free and fixed. It is a cheaper insurance compared to the Universal Life Insurance taking into consideration the low risk approach. A loan can be taken against this kind of policy.
  • Type 2 : The Universal Life Insurance can also be called as an investment policy which even provides the investor a death benefit. With flexible premiums premium payouts, some parts of it are re-invested to add more cash value to the sum assured. Unlike the Whole Life Insurance, ULI is more expensive because of higher returns and has risk factors involved. Hence the premiums here are flexible and also offer flexible death benefits.

What is Health Insurance?

Health insurance comes to your rescue only when you have health issues, need of medical assistance and hospitalization. The policy holder pays a fixed premium for their health protection. Here you get your medical expenses reimbursed by your insurance company after paying for the same yourself or the company takes care of the expenses directly with the hospital or facility that has treated you. These depend on the policy you have choosen as your health insurance plan.

Types of Health Insurance :

  • Type 1 : Individual Health Insurance – An Individual Health Insurance is for an individual as the name suggests. It is used to financially cover the expenses like illnesses, accidents, hospitalization and medical emergencies that may occur during one’s lifetime.
    Moreover, maternity benefits, OPD expenses, critical illness cover are all provided by individual health insurance.
  • Type 2 : Family Floater Health Insurance – This types of health insurance plan covers all household members against one premium. It covers illnesses, accidents, hospitalization and other medical expenses that may arise during our lifetime.
  • Type 3 : Senior Citizens Health Insurance – These are for those above the 60 years mark. Hence the name - “Senior Citizens”. This is custom made keeping in mind the various physical and psychological needs of a 60 year plus citizen. It involves domiciliary care, organ donation expenses and critical illnesses.

Above were the general differences between life insurance and health insurance.

Life Insurance vs Health Insurance :

Difference between health & life insurance is best seen as follows :

As mentioned above, health insurance tend to your medical expenses while you are still alive while the life insurance helps your family financially in case of your untimely demise.

Below are the key differences between Life Insurance and a Health Insurance policies:

Feature Life insurance Health insurance
Why should you invest in this? Your family is financially secured in case of your sudden death. Medical expenses are skyrocketing and with a health cover you need not dig deep into your pocket for any medical emergencies.
Core benefit The sum promised is paid to the beneficiary of the demised. All your treatment expenses are covered subject to maximum coverage amount and other conditions.
Additional Benefits Many benefits can be added on top of the cover policy. For example, maturity benefits, surrender benefits, loyalty additions etc. Some policies offer free health check-ups. No claim bonus can be added in terms of some policies.
Types of covers 1. Individual Cover
2. Group Cover
1. Individual
2. Family
3. Group coverage
Types of Plans Term plans, Savings, child-related (wealth creation), Retirement, etc. Comprehensive health insurance plans, critical illness cover, etc.
Tax Benefits Under Section 80C, Section 10(10D) of the Income Tax Act Under Section 80D of the Income Tax Act

In your financial portfolio, Life Insurance and Health Insurance are distinct elements. An informed decision taking into consideration your requirements will help you realize their individual potentials. In this article you will be very clear about the difference between health and life insurance.

Benefits of Life and Health Insurance :

There are innumerable benefits of life insurance and health insurance. Let’s have a look at their benefits through their plans individually.

Benefits of Life Insurance Plans :

  • Financial security and protection are the two most important benefits of Life Insurance.
  • Payouts are generally tax-free.
  • A guaranteed death benefit.
  • With life insurance comes Tax benefit However, Tax savings should not be the reason for buying a term policy. This policy offers tax benefits and exemptions as per prevailing tax laws.

Life Insurance and Health Insurance is for everyone who are worried about the future, for family and for the ones who care. Health insurance gets your medical affairs covered and Life insurance gets your family covered in your absence.

Life is uncertain, it is better to protect yourself and your loved ones before it’s too late. Both these insurance policies are crucial for each one of us. What you pick is now your personal choice.


*Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time’

The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale

Consult with your financial advisor before making any decisions on insurance purchase.

#For 30 Year Old Male, Endowment Plan Option, online purchase of policy excluding underwriting extra premium & GST.
^As lumpsum payout at the end of 20th year.

Suggested Plan

Bharti AXA Life Flexi Term Pro

  • A Non-linked, Individual, Non-participating Pure Risk Premium Life Insurance policy
  • The plan offers two options: Without Return of Premium and With Return of Premium
  • Under the Without Return of Premium variant, you have the option between Single Life cover or Joint Life Cover i.e., cover for your spouse under the same policy.
  • Flexibility in policy and premium payment terms

Bharti AXA Life Shining Stars

  • Non-linked, non-participating limited pay endowment Life Insurance plan
  • Designed to take care of the financial needs of your child.
  • Flexibility to opt between 2 Maturity Payout Options
  • Flexibility in Policy Term/Premium Payment Terms
  • A great short-term investment option for a child insurance policy.

Bharti AXA Life Guaranteed Income Pro

  • A Non-Linked, Non-Participating Individual Life Insurance Savings Plan
  • 4 Income options to choose
  • Guaranteed 10% Addition of Annualised Premium (as per the terms and conditions of the policy)
  • Get all your premiums back at the end of the payout period under Long Term Income and Deferred Income variants
  • Flexibility to choose premium payment term or policy term


Which is better, term insurance or life insurance?

The term insurance provides a predefined amount only in the event of unfortunate death of the insured during the term of the policy. The amount is payable to the nominee of the insured. If the insured survives the term, he will not get any amount. On the other hand, life insurance provides the amount in both the events : maturity and death. If the insured survives the term of the life insurance plan, he will get the maturity proceeds. In case of his death during the term of the life insurance, his nominee will get the death benefit. The amount of death benefit is much higher than the maturity proceeds. If you can afford a little higher premium, you can go for life insurance, so you will get some amount on maturity. However, if you want to cover your family with larger sum insured at minimum premium, opt for term insurance.

What kind of deaths are not covered in a term insurance plan?

The cause of death is most important to decide the scope of the term insurance. For example, the death due to terrorist attack is not covered under term insurance. Similarly, the death due to natural calamities like earthquakes or floods is also not covered. The accidental death can be covered through rider in the term plan. If you have a pre-existing illness that you did not disclose at the time of availing term insurance, the same shall not be accepted. Similarly, certain types of terminal illness are also excluded. If the policy holder dies outside the country, the term insurance is not applicable.

What happens to term life insurance if you don’t die?

Under standard term insurance, you will not receive any amount if you survive after the term completes. In case of “Return of Premium Term Insurance”, you will receive the premium amount paid by you during the term, in case of survival.