One of the most important parts of planning for the future is having insurance for yourself. Both life insurance and health insurance are crucial forms of risk mitigation that provide financial protection in the event of serious injury, illness or untimely death. Of course, they do this in different ways.
Here are 6 key areas of difference between health and life insurance:
1. Purpose Health insurance is a general insurance that covers medical expenses, typically limited to hospitalisation and follow-up treatment. Life insurance is a type of personal insurance that pays an assured sum in the event of your death to the nominee/s you specify.
2. Maturity Health insurance does not have a maturity date. You can only make claims against actual expenses, limited to the maximum sum insured. Life insurance will begin cyclic payouts after the maturity date along with a lump sum death benefit.
3. Additions Health insurance policies have a no-claim bonus. As long as you don’t make any claims, the cover increases every year till it reaches a fixed limit or cap. You can add riders – a provision that adds to or amends the term or amount of coverage often for an additional cost – for higher cover in specific situations, like personal disability, cancer or critical illnesses. Life insurance policies also have riders like loyalty additions and surrender benefits if you withdraw early. There are also plans available for specific purposes like retirement planning, child-related insurance, and term plans that cover you for a specific period.
4. Scope of Coverage Both health insurance and life insurance are available with individual and group coverage (for employees of a company), but you can also buy family floater health insurance poli-cies that cover your entire family, but will need to buy life insurance separately for each family member.
5. Premium Payments Since there is no maturity benefit, health insurance premiums are paid in lump sum upfront each year, with the option of paying for additional years in advance. Life insurance premiums can be paid in lump sum, installments, or a combination of the two. You can choose whichever option is most convenient.
6. Tax Benefits Both types of personal insurance offer tax benefits. Health insurance premium payments can be claimed under Section 80D of the Income Tax Act and life insurance under Section 80C, Section 10(10D) of the Income Tax Act. While most of your financial planning should be around mutual funds, equity funds and other investments, insurance is important too. Safeguard yourself and your loved ones by putting some money into both life and health insurance!
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