A family is one of the most important assets most of us have and as an earning individual, you would want to give the best of everything to your loved ones and keep them happy even when you are not around.
A term insurance policy is arguably the best way to protect your family financial future. It gives you the peace of mind knowing that your family can take care of their everyday needs in the event of your untimely demise. Similarly, a health insurance policy gives you the necessary financial cushion during a medical emergency in the family.
Often, first-time insurance buyers debate if they should buy a term insurance or a health insurance and which is better. If you too are facing the same dilemma, read on to know your answer.
What is term insurance?
Term insurance is one of the most popular and basic types of life insurance. In term insurance, you pay the premium for a specific period, i.e., the policy tenure, and in return, the insurance company pays the death benefit to your family in the event of your untimely demise.
What is health insurance?
Health insurance is a type of insurance that provides financial protection during medical emergencies. It essentially takes care of all the medical expenses of you and the family members covered under the policy.
Now that you know what health insurance and term insurance plans are, it would help to know the difference between the two. The difference can be drawn on various factors, which are discussed below.
- Pay out
Generally, the insurance company pays the death benefit to the nominee in a lump sum in the event of the policyholder’s demise.
In health insurance, the insurance company directly settles the bill with the hospital if you seek treatment from the network hospitals. The amount paid is equal to the expenses incurred sans the deductibles. You can use the balanced amount in the future when the need arises.
- Premium charges
Compared to other life insurance policies, term insurance plans have the lowest premium. You can get a term plan with coverage up to Rs. 1 crore at premiums starting less than Rs. 15 per day.
The premium for health insurance greatly varies based on your age, medical condition, type of policy chosen, riders added, etc. But, generally, the premium for health insurance is higher than a term insurance policy.
- Tax benefits
Term insurance offers tax benefits of the premium paid up to Rs. 1.5 lakhs in a financial year under Section 80C of the IT Act.
The premium you pay for health insurance qualifies for tax deduction up to Rs. 25, 000 under Section 80D of the IT Act. If you have purchased a policy for your old-aged parents (who are more than 60 years), you can get an additional deduction of Rs. 25,000.
- Other Benefits
Unlike other life insurance products like ULIP, term insurance does not offer any maturity benefits. It only acts as a financial cushion for your family in your absence.
Health insurance may not have maturity benefits, but you can avail no-claim benefits or NCB if you don’t file a claim during the policy period. The benefits offered are in terms of discount on the premium or increased sum assured upon policy renewal.
Term Insurance or Health Insurance – Which is Better?
The truth is both term insurance and health insurance serve different purposes, but both give you financial protection. While term insurance secures your family’s financial future, health insurance gives you the necessary protections against hospitalisation expenses and helps your savings intact.
So, it is advisable that you purchase both term and health insurance to get complete financial protection against uncertainties.
