- Term insurance is a pure protection plan and a product which is an absolute must for every individual while health insurance is an insurance policy that ensures that you get cashless treatment or expense reimbursement, in case you fall ill.
What is Term Insurance?
Term Insurance Plan is designed to provide a defined amount (lump sum) of money to the family, in case of demise of the policyholder. The money will go to the people you nominate as beneficiaries on your policy. The benefit under such a pure term insurance plan is payable only upon the demise of the policy holder.
Why You need Term Insurance?
Term plans have the lowest premium compared to all other insurance plans. The proceeds of a term insurance policy can be used to repay any debts you must have run up, pay for funeral costs, compensate for education costs for your kids and replace future income that your family would still need to lead a comfortable life. Thus, if you buy term insurance while you’re still young and healthy, it can safeguard you and your family against any surprises life might throw your way. Term insurance is a must-have and should be a part of everyone’s insurance portfolio.
Types of Term Insurance Policies
There are 6 types of term insurance plans as mentioned below:
- Level Term Insurance Plan
- Term Insurance Plan With Return of Premium (TROP)
- Increasing Term Insurance Plans
- Decreasing Term Insurance Plans
- Convertible Term Insurance Plans
- Term Insurance Plans with Riders
What is Health Insurance?
Health insurance is a contract between the insured person and an Insurance Company that covers all costs related to medical expenses of the insured in exchange for a fixed premium. This cover can be bought for an individual or for an entire family and can be used to seek adequate medical help in case of an emergency or even a pre-planned medical procedure without worrying about the financial implications.
Why Do You Need Health Insurance?
Medical emergencies can strike anytime and can put your finances under considerable stress. In such cases, planning in advance is the best thing to do. The primary objective of a Health insurance is to cover and reimburse the actual expenses incurred while treating illnesses/medical conditions within the policy sum assured. Having a health insurance gives you peace of mind knowing that you will get much-needed financial assistance when dealing with any medical contingencies. Additionally, a health insurance plan takes care of not just hospital expenses and costs but also handles both pre-and-post hospitalization expenses. Moreover, one can choose from a wide array of health insurance plans available in the market. Each plan is designed to take care of one’s personal health care needs while offering a different set of benefits.
Types of Health Insurance Policies
There are 7 types of health insurance policies in India:
- Individual Health Insurance
- Family Floater Health Insurance
- Group Health Insurance
- Senior Citizens Health Insurance
- Maternity Health Insurance
- Critical Illness Insurance
- Top-Up Health Insurance
Difference between Term and Health Insurance
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Feature
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Term Insurance
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Health Insurance
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Reason for Inclusion in your portfolio
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A Term Insurance is designed to financially safeguard the policyholder and his family by providing monetary benefits to the beneficiary in case something untoward were to happen to the policyholder.
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A health insurance plan is designed to take care of the hospitalization and medical expenses incurred by the policyholder or any other member covered under the policy.
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Maturity Benefit
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No maturity benefit except in return of premium plans wherein the premiums paid are returned at the end of policy term.
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In a health insurance plan, you can’t recover any money invested in the premiums. Because there is no life cover, there is no pay-out or lump sum payable in case the insured were to meet with an untimely demise.
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Tax Implications
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All term insurance premiums paid are tax-exempted under section 80C (up to Rs. 1.5 lakh). Furthermore, it also yields tax-free income when the maturity claim is paid under section 10(10(D)) of the Income Tax Act.
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All premiums paid for not only you and your family but also your elderly parents makes you eligible for income tax exemption under Section 80D of the Income Tax Act, 1961.
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Why do we need both?
Both term insurance and health insurance have their distinct set of benefits while being two of the most crucial types of insurance plans. This is why it’s imperative that you include both in your financial portfolio. While term insurance offers financial aid to your nominated beneficiaries in case something unfortunate were to happen to you, health insurance, on the other hand, is designed to cover any medical costs you might have to incur in the case of hospitalization and/or critical illnesses.
