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Difference between Term Insurance & Health Insurance

Difference Between Term Insurance and Health Insurance

The importance of insurance is not unknown to most people. While everyone understands that insurance is a necessity in case of unforeseen events, every insurance is not the same. The different types of insurance serve different purposes. The most confusing insurance policies among youngsters are term insurance and health insurance. The term insurance is the life insurance that helps your family members in case of your unfortunate death. On the other hand, the health insurance assures financial compensation of your medical bills in case of critical illness and prolonged hospitalization. There are differences in the premium, scope, purpose and applicability of both types of insurances. The following paragraphs explains the difference between health insurance and term insurance in detail.

What is Health Insurance?

Health insurance is the difference between the insured and the insurance company to provide the financial compensation in case of specified disease happens to the insured. The amount of financial compensation is governed by the terms and scope of your health insurance policy. The purpose of health insurance is to keep your financials secured against unforeseen and large medical expenses. Usually, the compensation is limited to the actual expenses incurred or the sum insured, whichever is less.

What is Term Insurance?

The term insurance is the contract between the insured and the insurance company to pay the financial compensation to the nominee of the insured in case of demise of the insured. The purpose of the term insurance is to provide financial support to the family of the insured in case of unfortunate death of the insured. The amount of compensation is not linked to any expense, but it is decided at the time of availing the policy.

Term Insurance Vs Health Insurance

For a smooth financial life of yourself and your family, both kinds of insurance - term insurance and health insurance are required. Below are the major differences between the two:


The purpose of the term insurance is to provide financial support to your family after your death. There is no benefit during your lifespan. On the other hand, the purpose of health insurance is to provide financial support to yourself in case of a medical emergency with huge expenses.

Premium Amount

The premium amount of the term insurance is minimal and affordable to the most. However, the premium for health insurance is costly, particularly after a certain age. It is advisable to avail the health insurance when you are healthy and young.

Renewal Benefit

The term insurance does not come with renewal benefit. Under standard term insurance, you usually pay the same amount every year. On the other hand, if there is no claim under your health insurance policy, you can avail No-Claim Bonus(NCB) in your next renewal.

Tax Benefit

The premium of term insurance is deductible from the income under section 80C of the income tax act, subject to the limit of Rs. 150000. The health insurance premium is deductible under section 80D of the income tax act.

Types of Policies


Types of Health Insurance Policies


Individual Health Insurance

As the name suggests, it covers one person against the expenses of a medical emergency. The biggest reason to buy individual health insurance is, to customize the policy as per your specific requirement. The specific requirement could be based on age, gender, habits, special medical history and specific heredity related issues. Moreover, such plans are also suitable for young persons with no family.

Family Health Insurance

Such plans are popularly known as family floater plans. It covers the entire family under one policy. When you calculate the cost of health insurance premium per family member, the family health insurance is much more chapter as compared to the individual plan. Moreover, you don't have to manage multiple policies and payments for all the policies of the family members once you have family health insurance.

Unit Linked Health Plan

This plan is aimed at the dual purposes of investment and health insurance. The part of your premium payment is invested in the units of your choice. It could be stocks, bonds or government securities as per portfolio offered by the insurance company. The other part of your premium goes toward insurance. You can avail the cashless treatment or medical expense reimbursement as per policy terms and network hospital coverage. If you want to manage your investment and health insurance under one roof, you can select this plan.

Senior Citizen Health Plan

By virtue of age, the senior citizens are more prone to the disease that needs hospitalization. Many companies are not offering health insurance plans to the senior citizens without medical check up. The pre-existing diseases are also not covered. The premium for senior citizen health insurance is also high, because of more risk of claim for the insurance companies. In case the senior citizens in your family are not covered with health insurance plans, it is high time to avail the cover for them. There are some plans in the market, that are specifically designed for elderly people above 60 years of age.

Types of Term Insurance Policies


Standard Term Insurance Plan

Your premium amount during the entire term of the plan remains constant. The sum insured also remains unchanged. If the policy holder dies during the term of the plan, the nominee gets the amount equivalent to the sum insured.

Return of Premium Term Insurance

If the policy holder survives the entire term of the plan, he will not get any benefit under the standard term insurance plan. However, when you select the “Return of Premium” term insurance plan, you will get the amount refunded at the end of the term. In case of unfortunate demise during the term, the nominee will get the amount as specified in the term insurance policy. The premium of this plan is slightly higher than a regular term insurance plan.

Increasing Term Insurance

With every passing year, inflation reduces the value of money. If you have insured yourself for Rs. 5 lacs today, the value of the same will be negligible after 20 or 30 years. To ensure that your nominees get a meaningful amount in case of your unfortunate death, it is advisable to revise the term insurance with time. Under increasing term insurance, you will pay a little higher premium every year and your sum assured will also increase proportionately.

Decreasing Term Insurance

The insurance companies assume more and more risks with each passing year of the insured. On the other hand, the insured’s budget is limited.. In such a case, the insurance company agrees to provide term insurance at a constant premium, however with a reduced sum assured every year. You should opt for such a plan only if you are constrained with the budget. In fact, over time, the inflationary effect reduces the value of sum insured.

Convertible Term Insurance Plan

It is just like a standard insurance plan, however with an option to convert it into an endowment plan. The insured has to pay a little more amount of premium for the same. If the insured does not wish to pay additional premium, the plan remains valid as a standard term insurance plan.

Term Insurance with Riders and Options

As per your individual needs and risk perception, you can avail additional riders and options with your standard term insurance plan. Consider exploring the right riders and options for you when you sign up for your term insurance plan.

Benefits of Health Insurance and Term Insurance Plans

Both, health insurance and term insurance provides valuable benefits to you and your family. Below are key benefits for your ready reference.

Benefits of Health Insurance Plans

The health insurance supports you financially against high hospitalization expenses. Below are the key highlights of health insurance :

  • Restoration Benefit : Under family floater plan, if the sum insured limit is exhausted in a particular year, the insurance company resorts it for the benefit of the entire family.
  • Daily Cash Cover : During hospitalization, you will incur the indirect expenses for which bill may not be available You will be provided daily cash till your stay in the hospital.
  • Pre and Post Hospitalization Benefits : The expenses of critical illness like X-ray, blood and other medical reports, medicines before 30 days of hospitalization and after 60 days after discharge from the hospital are covered. The days and amount varies as per specific plan.
  • Accident Cover : If you have opted for personal accident cover along with health insurance, the expenses of the accident treatment will also be covered under your health insurance plan.

Benefits of Term Insurance Plans

The term insurance provides the financial benefit to the family of the insured after his death. The following are key features of this insurance plan.

  • Financial support to the family : When the breadwinner of the family member passes away, the family enters into financial distress. The payout from the term insurance helps to reduce the troubles of the family.
  • Tax Benefit : Although tax benefit is not the purpose of the term insurance, when you pay the premium, you are eligible for deduction under section 80C of the income tax act. Moreover, your family will be eligible for deduction under section 10(10D) for the payout after your death.
  • Value For Money : There are other types of insurance plans that give benefit to the family in case of demise of the insured. However, the premium amount is very high. The term insurance provides reasonably high sum insured protection with affordable premium.


*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 Smart Invest Guaranteed Plan

  • A Non-Linked, Non-Participating, Life Insurance, Individual Savings Product
  • Guaranteed Financial Returns (Provided policy is in force and all due premiums have been paid)
  • Option to choose from 2 plan variants
  • Flexibility in Policy Term/Premium Payment Terms

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

Frequently Asked Questions( FAQs )

What Does Life Insurance Cover?

In its basic form, a life insurance policy provides death benefits and is designed to cover loss of income, end-of-life expenses, funeral costs and other financial needs that a family may have if you – the policyholder – should die unexpectedly.

While death benefits are often kept for funeral expenses and income replacement, life insurance is a very flexible type of coverage that can be used in a number of ways.

How Much Life Insurance Do I Need?

Life insurance can be customized to your specific needs, taking into account your family’s financial picture and your future financial security. The amount of life insurance you need depends on your goals, your family, and the expenses you want your family to be able to cover once you are no longer there to support them.

What is Life Insurance?

Life insurance is a contract between an insurer and a policy owner. A life insurance policy guarantees the insurer pays a sum of money to named beneficiaries when the insured dies in exchange for the premiums paid by the policyholder during their lifetime. Life insurance is a key investment, especially in uncertain circumstances, like the present. Life insurance policies work in three stages :


  • Purchasing a life insurance policy

    Buy the best life insurance policy that offers flexibility of benefits. Other factors to consider are plan tenure, premium, riders, and, most importantly, the reason you are buying life insurance.

  • Premium payment

    It is advisable to choose a premium that you can easily pay on time. As per the life insurance contract, the insurers promise to pay a pre-decided amount to you (policy holder) or your nominee, provided all premiums have been paid. All benefits then are based on timely premium payment.

  • Filing a claim

    The last stage of a life insurance plan is related to filing for a claim to get insurance benefits.

    In case of your unfortunate demise, your nominee will be eligible for the sum assured as defined in the contract. To get it, the nominee has to submit a claim form along with various documents. Upon verification of claim, the insurance company releases the benefit to the nominee.

    For life insurance plans with a return of premium, a total of all premiums is paid back if the insured survives the policy term, which can be a great financial aid in the short or long term.