Which Is Better Health or Term Insurance?

If you are planning to buy a mediclaim policy for your family and are wondering should you buy it even if you have a term insurance policy? Well, both health and term insurance plays an integral role in our lives, especially when the cost of medical treatment in India is on a constant rise. While health insurance covers your hospitalization expenses, a term life insurance policy offers financial security to your loved ones after the sudden demise of the policyholder.

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    Which Is Better Health Insurance or Term Insurance?

    Should you buy a health insurance policy or a term insurance policy, is always debatable. Well, both serve their specific purposes; here is a quick rundown of both of them to help you decide better:

    The Need for Term Insurance

    Term insurance provides financial support to the dependents of its policyholder in case of his/her sudden or untimely demise within the policy tenure. So, if you do not want your loved ones and dependents to suffer when you are not around, then you should consider buying a term insurance policy. It will offer financial security and will help your dependents continue living a similar lifestyle. 

    There are various types of term plans that you can consider. Assess your family’s future financial needs and buy a plan after considering various life events such as house loan, children’s marriage, their higher education, etc. If you think that your untimely demise can lead your family to financial trauma, then you should get a term insurance policy.

    The Need for Health Insurance

    Healthcare expenses are increasing every year and health issues do not come with prior notice. No matter how much good care you take of yourself, health problems remain unpredictable.

    It is wise to get a medical cover with adequate healthcare coverage if you do not want to run from pillar to post to arrange funds at the eleventh hour.

    It is not sensible to pay expensive hospital bills when you can buy a medical insurance policy to reimburse your healthcare expenses. There is no worrying about arranging the funds to avail of the best medical treatment. You just need to pay the premium every year to avail of the benefits.

    However, before purchasing a mediclaim policy for your family or yourself, you should compare different policies based on your needs and then select a suitable one.

    Types of Term Insurance Plans

    Below are some of the different types of term plans that you can consider:

    • Level Term Insurance Plan- In this type of term plan, the sum assured remains the same throughout the policy term.
    • Term Insurance with Return of Premium (TROP) – This variant of a term plan returns your premium if you outlive the policy tenure. The premium is payable at the end of the term. 
    • Premium Refund Plan– If you survive the policy term, the premiums are refunded to you and are tax-free.
    • Term Plan with Riders– You can opt for additional coverage benefits like waiver of premium, critical illness rider, etc. to enhance your basic term insurance coverage.
    • Convertible Term Plans– You can convert this type of term insurance plan into whole life insurance or an endowment plan.
    • Increasing Term Plan– Under this type of term insurance plan the sum insured can be increased every year while the premium remains the same.
    • Decreasing Term Plan– A percentage of the sum assured decreases with each passing year and is helpful in case you have an ongoing loan or mortgage.

    Types of Health Insurance Plans

    There is a mediclaim policy for everyone. Below are some of the different types of medical policies that you can consider:

    • Individual Health Insurance- An individual health plan offers coverage to only one individual i.e. the policyholder. So, under this policy, as a policyholder, you will avail the benefits of the medical insurance against the premium paid.
    • Family Floater Health Insurance- Mediclaim policy for family offers coverage to an individual, where he/she can include his/her family members including spouse, children, and parents. For example, 
    • Senior Citizen Health Insurance- Such health plans are designed to offer medical cover to elderly people above the age of 60 years.
    • Group Health Insurance-Group health insurance is usually provided by an employer or a company to its employees.
    • Critical Illness Insurance- The cost of treatment for critical illnesses is quite exorbitant. It covers life-threatening diseases such as cancer, kidney failure, cardiovascular diseases, etc.
    • Top-Up Health Insurance Plans-You can buy them along with your current health plan. It will prove to be useful upon exhaustion of the threshold limit of your base medical insurance policy.

    Benefits of Term Insurance Plans

    Below are the benefits of buying a term insurance plan:

    • A term insurance plan offers a high sum assured at an affordable premium.
    • It offers multiple death benefit pay-out options.
    • It is the most basic type of life insurance plan that is very easy to understand.
    • To enhance the coverage of your term insurance plan, you can add a rider benefit to it. The insurance providers offer various riders for this purpose. 
    • It also offers income tax benefits. 
    • If you add a critical illness rider to your term insurance plan, you get a lump-sum amount on diagnosis of the covered critical illnesses in your policy. 
    • A term insurance plan with the 'Return of Premium' option enables you to get back your premiums paid if you outlive your policy term. 
    • Accidental death benefit cover is also provided. 

    Benefits of Health Insurance Plans

    Below are the benefits of a health insurance plan:

    • A health insurance policy covers pre and post-hospitalization expenses up to the sum insured limit.
    • Some health insurance plans offer maternity benefit that covers delivery expenses and new-born baby medical expenses.
    • Home (domiciliary hospitalization) care treatment expenses are also covered under some health insurance plans. 
    • Diagnostic expenses like x-rays, scans, expenses of medicines, ambulance, daycare procedures, ICU, OT, etc. are also covered.
    • Critical illness cover can be bought as an add-on or as a standalone product.

    Difference Between Term Insurance and Health Insurance Plans

    Term Insurance

    Health Insurance

    It offers financial protection to the dependents of the insured person.

    It pays for the medical expenses of the insured members.

    It pays for the medical expenses of the insured members.

    The sum insured amount is paid to the insured person to be able to pay for hospitalization expenses in case of an accident, illness, or injury.

    The premium charged is nominal.

    The premium charged is comparatively high.

    The premium is paid annually.

    The premium is paid annually.

    If the policyholder survives the policy term and opts for a premium return plan then the insurer will pay him/her the premiums paid when the policy ends.

    There is no provision to get the premium amount back. However, there is a ‘No-Claim-Bonus’ benefit for not filing a claim during the policy period.

    The rider benefits include the waiver of premium, critical illness rider, accidental death, and permanent disability are offered.

    There are various rider benefits like critical illness cover, worldwide treatment cover, maternity cover, etc. are offered

    Both health and term insurance policies come with a lot of add-ons and benefits; it is important to look out for them with the right insurance company.

    Summing It Up!

    To sum it all, if you compare the benefits of both, you will understand the need for both term and health insurance, sooner or later. It is better to make an informed at the right time before it’s too late.

    Written By: PolicyBazaar - Updated: 29 July 2021
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