Health Insurance vs Term Insurance: Which One Do You Need?

No one plans to get sick or have an accident and face the financial problems that can come from these unfortunate events. It can be burdensome for both individuals and their families, especially since hospitalisation costs are currently estimated to be twice the inflation rate. To safeguard against this, obtaining health insurance or term insurance is essential. But what exactly is the difference between term life insurance and health insurance

While health insurance plans and term insurance offer several benefits, the main reason to choose either is the extra financial protection they provide in case of unexpected events.  This could relate to a smaller procedure, such as appendicitis, or even an untimely death caused by a road accident. We rarely think of ourselves alone when planning for such events, and since family is an important part of our lives, it is essential to plan for their care if the primary breadwinner of the household passes away. These events undoubtedly cause emotional turmoil, so why add extra stress to one’s finances as well?

What is Health Insurance?

A health insurance policy provides financial aid when an individual incurs medical expenses due to an accident or illness.

Healthcare insurance is a contract between the policyholder and the insurance provider that pays out money if the insured contracts a certain sickness. Your health policy's conditions and coverage limitations will determine how much money you will get. Its goal is to protect your finances against unplanned, significant medical costs. Normally, the award is capped at the lesser of the actual costs spent or the amount insured.

Types of Health Insurance Plans

There are broadly two kinds of health insurance:

1. Mediclaim Insurance:

This is a base medical insurance that accounts for any hospital expenses that may be incurred while receiving treatment at a hospital either due to an illness or an accident. This means that if an individual undergoes surgery, the treatment can be paid for through mediclaim. Additionally, it often accounts for family members as well if one opts for family health insurance plans and it usually includes coverage for a number of other services as well such as post-hospitalisation expenses and follow up check

2. Critical Illness Cover:

Critical Illness cover is a type of medical insurance that caters to individuals who seek cover against long-term, life-threatening diseases, such as cancer, heart attack, stroke, or kidney failure. Unlike regular health insurance, which covers hospitalisation costs, critical illness cover pays a lump sum upon diagnosis of a covered condition. This payout can be used for treatment, recovery expenses, or even to replace lost income during prolonged illness.

3. Family Health Insurance

Family health insurance, often referred to as a family floater plan, provides coverage for multiple members of a household under a single policy. It allows families to share a common sum insured, making it a cost-effective way to secure everyone’s healthcare needs. These plans typically cover hospitalisation, surgeries, and sometimes outpatient treatments, depending on the policy. Family health insurance ensures that, whether it’s your spouse, children, or dependent parents, everyone has access to quality medical care without straining finances.

4. Senior citizen Health insurance 

Senior citizen health insurance is designed specifically for individuals above a certain age, who may have increased healthcare needs. These policies focus on covering age-related illnesses, hospitalisation costs, pre-existing conditions, and regular health check-ups. Premiums for senior citizen plans may be higher due to the elevated risk, but the coverage ensures that older adults can access medical care without financial stress.

What is Term Insurance?

Term insurance, on the other hand, is a form of life insurance policy. This means that if the policyholder passes away during the specified period of the policy, the individual’s beneficiaries will receive an assured sum as a death benefit allowing them to maintain their lifestyle, meet financial obligations and continue pursuing financial goals. The death benefit serves as an income in case the individual was a primary earner, but also the sum can be put towards a goal such as a child’s education. Term insurance is a life insurance policy that occurs only for a specified period and is often opted for when someone has a health scare and would like to be on the safe side.

Types of Term Insurance Policies

Term insurance is a straightforward and affordable way to provide financial security to your loved ones in case of an untimely demise. Understanding the different types of term insurance policies can help you choose a plan that best suits your family’s needs and long-term financial goals. Mentioned below are several kinds of term insurance policies you should know about:

1. Level Term Insurance

This is the most common and straightforward plan where the life cover (sum assured) remains the same throughout the entire policy duration. It is ideal for individuals with stable financial responsibilities who want a predictable, fixed premium.

2. Increasing Term Insurance

Under this policy, the sum assured increases by a fixed percentage or amount every year to keep up with rising inflation. It is best suited for young professionals who expect their income and family responsibilities to grow over time.

3. Decreasing Term Insurance

The coverage amount in this plan gradually reduces over time, usually in sync with a major liability like a home loan or mortgage. It ensures that if something happens to you, the insurance payout covers the outstanding debt without you paying for unnecessary extra cover.

4. Return of Premium (TROP)

Unlike standard plans where you get nothing if you survive the term, a TROP plan refunds all the premiums paid at the end of the policy period. While these plans are more expensive, they appeal to those who view regular term insurance as a "sunk cost."

Difference Between Term Insurance and Health Insurance

Understanding the difference between health insurance and term insurance is essential for building a well-rounded financial protection plan. While both policies offer security, they cater to very different needs; one protects you from rising medical costs, while the other secures your family’s financial future. The table below highlights the key differences to help you make an informed choice.

Conclusion:

Regardless of one’s current health status and financial situation, a health insurance policy and a term insurance plan are essential in today’s world. While buying a health insurance policy or group health insurance policy, always compare health insurance plans to ensure that the one that is finally chosen reflects all your goals and financial needs, and that you fully understand all the aspects of your health insurance plan before opting for it.

At Niva Bupa, we offer health insurance with comprehensive benefits, including pre-and post-hospitalisation, prescription medications, diagnostic tests, and more. We ensure that you have a partner who supports you in your times of need.

People Also Ask

1. What is the difference between health insurance and term insurance?

The difference between health insurance and term insurance lies in their purpose. Health insurance covers medical and hospitalisation expenses, while term insurance provides a lump-sum payout to the family in case of the policyholder’s death.

2. How does health insurance vs term insurance protect you financially?

When comparing health insurance vs term insurance, health insurance safeguards your savings against rising medical costs. Term insurance, on the other hand, protects your family’s financial stability if the primary earner passes away.

3. Is term insurance better than health insurance?

Term insurance is not better than health insurance, they serve different needs. Understanding the difference between term insurance and health insurance helps you see why both are essential for complete financial protection.

4. Can I buy both health insurance and term insurance together?

Yes, buying both ensures comprehensive coverage. Knowing the difference between term life insurance and health insurance helps you plan for medical emergencies as well as your family’s long-term financial security.

5. Who should invest in health insurance?

Health insurance is important for everyone, regardless of age or lifestyle. In the health insurance vs term insurance comparison, health insurance addresses immediate healthcare expenses, which can otherwise strain your finances.

6. Who should consider term insurance?

Term insurance is ideal for individuals with dependents. Understanding the difference between health insurance and term insurance clarifies that term plans focus on income replacement and future financial goals.

7. Does term insurance cover medical or hospital expenses?

No, term insurance does not cover medical costs. This highlights a key difference between term insurance and health insurance, only health insurance pays for treatments, hospitalisation, and related expenses.

8. Does health insurance provide any death benefit?

Health insurance does not offer a death payout. This is a major point in the difference between term life insurance and health insurance, as term plans are designed specifically to provide death benefits.

9. Which has higher premiums: health insurance or term insurance?

In the health insurance vs term insurance comparison, health insurance generally has higher premiums due to frequent claims. Term insurance premiums are lower as benefits are paid only upon death.

10. Which should I buy first: health insurance or term insurance?

Ideally, both should be purchased early in life. Understanding the difference between health insurance and term insurance helps you prioritise medical protection while also securing your family’s future.