Human beings tend to have an innate need to feel secure. People buy different types of insurance policies to fulfill their need for security and eliminate uncertainty about the future. Two of these policies include term insurance and health insurance. Quite often these are confused to be the same however, both these policies are distinctive. This article underlines the differences between term insurance and health insurance policies.
Term insurance is a plan under which an insured amount is offered to the family of the insured in the event of the policyholder’s death. It is for a fixed period of time within which if the insured dies, the family of the insured gets protection through financial assistance.
Health insurance is a contract between a policyholder and the insurance provider under which the latter is liable to cover the medical expenses of the insured if the insured is hospitalized due to a disease, an ailment, or accident.
Both these policies differ significantly on the following lines:-
Premium: When both the policies are compared, the premium for term insurance is considerably less than health insurance. In fact, the premium for the former is usually among the most inexpensive premiums across all the policies.
Benefit: Health insurance policies cover medical expenses and the cost of hospitalization in case the policyholder falls ill or gets injured. On the other hand, term insurance cover is available in the event of the policyholder’s death. It ensures that the family of the deceased does not have to worry about finances after the death of the policyholder.
Beneficiary: The policyholder, in the case of health insurance, is directly benefited by the cover as the policy takes care of his/her hospital bills, etc. Alternatively, the beneficiary in the case of term insurance is the family or a family member as nominated by the policyholder.
Duration: Term insurance generally has a fixed and comparatively longer tenure than health insurance. Health insurance is ordinarily 1-3 years long but is extendable, unlike term insurance.
Tax exemption: Although both kinds of policies are exempted from tax implications, the amount for tax exemption varies. The premium under a health insurance plan is exempted from tax till ₹25,000 annually whereas under term insurance the limit for tax exemption is ₹1,50,000.
To sum up, health insurance and term insurance are invariably distinctive insurance plans that are bought for different reasons. Many individuals even buy both these policies as these have different benefits and safeguard against unfortunate events.