How are term insurance and health insurance policy different from each other?
People are often confused between term insurance and health insurance. Many of us think that term insurance is not required if they have health insurance. This is because each one of us doesn’t understand the difference between both kinds of coverages.
In short, term life insurance is a complete protection plan that offers financial security to your family in times when you are not with them. In contrast, health insurance provides financial coverage for your medical expenses such as cashless treatment during hospitalisation or reimbursement of the medical costs. Not clear enough? Read through to understand both the concepts in detail.
Term Life Insurance
Term Insurance is such a product that is designed to provide financial security in the form of a lump-sum amount to your family during uncertainty. The benefit under pure term life insurance can only be availed upon the demise of the policyholder.
Need for Term Insurance: Term life policy has the least premium when compared to the other life insurances. The coverage amount of term insurance is quite big and enough to repay any pending loans, fulfil education costs of kid(s) and manage regular expenses, making your family self-reliant. Therefore, if you purchase a term plan at your young age, it can financially secure family and protect them from any unprecedented situation. Term Plan is an unquestionable necessity and ought to be included in everybody’s protection portfolio.
Maturity benefit: Term Life Insurance does not offer any maturity benefit; rather it provides financial coverage to the policyholder’s dependents in his or her absence. However, the return of premium term insurance plans gives maturity benefit wherein the coverage amount is returned to the insured at the end of the policy term.
Tax benefit: The premiums paid for term life insurance are eligible for tax exemptions under section 80C of the Income Tax Act. Moreover, the sum assured amount of the term plan which is given to the nominee(S) of the policy is also tax-free under section 10(10(D)) of the Income Tax Act.
Health Insurance Policy is an agreement between the policyholder and the insurance company, that takes care of all medical expenses of the insured. It offers adequate financial assistance during a medical emergency or even in case of a pre-planned medical treatment. This kind of insurance policy can be purchased for an individual or a whole family and keeps you away from financial implications during the most stressed situation.
Need for Health Insurance: Health emergencies can strike anytime while putting you under immense pressure. Such situations can hamper your entire savings, making you feel miserable. Thus, you need to be prepared and arrange funds for the same beforehand. The main objective behind having health insurance is to get covered for the medical expenses within the sum assured in the policy. Health insurance coverage also deals with pre and post hospitalisations costs. Besides, there is an array of health insurance plans accessible in the market. Each one of which is intended to deal with various health care needs while offering different benefits. Overall, health insurance policies give peace of mind securing with much-needed financial assistance required for medical eventualities.
Maturity benefit: Health Insurance does not offer any return of money invested in the premiums as there is no life coverage. Also, it does not provide any pay-out in case of the untimely demise of the policyholder.
Tax benefit: In health insurance policy also, the premiums paid for yourself as well as your family are eligible for tax exemption under Section 80D of the Income Tax Act, 1961.
Are both required?
Whether it is term insurance or health insurance policy, both have distinct features, advantages, and disadvantages. However, both are important and should be included in your financial portfolio. While doing this, you just need to think smartly, understand their importance and plan accordingly. Term life insurance offers financial help to your dependants if some mishap happens to you, while health insurance policy helps with medical expenditure in case of hospitalisation expenses or any treatment cost. To gather more information on the same, you can visit BimaKaro.in, which offers term insurance policies from top insurers in India.