Difference between Health Insurance and Term Insurance

When it comes to purchasing insurance, most people are confused between health insurance and term insurance. Both these types of insurance have their own set of unique benefits. So, the main question arises: Which one should you choose? – Health insurance, wherein you will have financial backup to fulfill medical needs when your health does not support you? Or Life Insurance, wherein your loved ones will be financially protected in case of your absence?

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To make your selection easy, let’s understand the difference between health insurance and term insurance: 

What is Term Insurance? 

Term insurance s a pure protection plan that is specifically designed to provide a pre-specified amount of money, generally paid as a lump sum, to whoever the life assured nominated as a nominee. In case of the policyholder’s unfortunate death, the nominee will receive the benefits. 

Nowadays, term insurance is a necessity for every person because it offers the benefits of life insurance. Various term insurance plans do not provide maturity benefit to the life assured unless the policy mentions it in documents. 

Types of Term Insurance Policies 

  • Level Term Plan – In this, the sum assured remains unchanged during the whole term and the amount is paid to the family members after the policyholder’s death. 

  • Increasing Term Insurance – The death benefit increases every year, throughout the policy term. The premium amount also increases with the increase in sum assured. 

  • Decreasing Term Insurance – The sum assured decreases by a fixed % each year. The amount of premium remains constant, but the risk coverage is reduced and/or affected. 

  • Premium Refund Term Insurance – If the policy term ends and the life assured survives, then the premium amounts are refunded free of taxes. 

  • Convertible Term Insurance Plan – In this, the policyholder has the option to convert the existing plan to an endowment assurance plan by paying a little extra amount of premium 

  • Term Insurance plan with riders – The life assured can also opt for add-on benefit or additional coverage/ benefits in form of a rider to increase the coverage of his/her base plan. 

What is Health Insurance? 

Health Insurance is an agreement or contract between the insurance company and the policyholder. It mainly covers all the policyholder’s medical expenses, provided that they pay a fixed amount of premium on a regular basis. Health insurance can be purchased for all family members so that in case of any medical emergency, they will be effectively covered. 

These plans are important, mainly for families living in urban regions where costs of health care are a lot and diseases are caught more often. These plans provide you cashless treatment or full reimbursement of the hospitalization bills so that you can rest assured that your life will move normally after any medical emergency. 

Types of Health Insurance Policies 

  • Individual Health Insurance – This policy covers a single person. 

  • Family Floater Policy – The whole family along with the life assured is covered under a single policy, where the premium amount is paid yearly. 

  • Unit Linked Health Insurance Plan – The insurers offer investment and coverage under the unit-linked plan. 

  • Senior Citizens Health Insurance – This policy is specifically for senior citizens, that provides all the probable benefits that cover the common treatments in old age. 

Difference Between Health Insurance and Term Insurance 

Type of Benefit

Health Insurance

Term Insurance


Health Insurance protects you and your family members from unexpected medical expenses 

Term Insurance is a policyholder’s protection cover for his/her loved ones. It secures the family members financially in case of the policyholder’s unfortunate demise. 


Health insurance offers coverage on the health/medical claims within the term

Term Insurance offers coverage for the policyholder’s premature death within the fixed tenure. 

Maturity Benefits 

This plan does not provide any type of maturity benefits when the policy tenure ends

It provides maturity benefits at the last of a policy tenure


The premium you are required to pay for health insurance is relatively higher than the term insurance. 

Term insurance premiums are lower in comparison to others

Death Benefit

It does not provide death benefits in case of policyholder’s demise 

The plan provides the nominee with a lump sum money if the policyholder passes away

The premium amount payouts are mainly monthly, though some insurers also provide yearly, half-yearly, or quarterly premium payouts. 

The payouts are mostly yearly. 

Tax Implications 

All premiums paid for you, your family members, elderly parents are eligible for income tax deductions u/s 80D of the Income Tax Act, 1961. 

All premium paid is exempted from tax u/s 80C i.e., up to Rs. 1.5 lacs. Moreover, the tax benefit is also available for maturity claim u/s 10(10D) of the Income Tax Act, 1961. 


Range commences from 5 to 10 years 

Range commences from 10 to 30/45 years

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Should you Buy a Health Insurance plan or a Term Insurance Plan? 

A term plans works in a different manner as compared to a health policy. Based on your financial conditions and requirements, you can select a plan that suits your preferences. 

Why Do you Need Term Insurance? 

Term insurance plans are cost-effective and have the lowest premium as compared to other insurance plans. The profits of a term plan can be utilized to repay any debts you may have, pay for funeral prices, recompense for educational expenses for your children, and replace the future salary that your loved ones would still require to live a comfortable and happy life. Term plans also offer terminal illness cover which will specifically be advantageous if you are diagnosed with any terminal illness. So, if you purchase term insurance when you are healthy and young, it can protect you and your family against any uncertainties that life may throw on your way. These days, a term plan is a must-have and should be considered by everyone to include in their insurance portfolio. 

Why Do you Need Health Insurance? 

Medical emergencies and uncertainties can strike you anytime anywhere that can put your finances under a substantial burden. The major objective of health insurance is to reimburse and cover the exact expenditures incurred while managing medical conditions/illnesses within the policy SA. Availing health insurance provides you peace of mind and a financial back up while dealing with medical emergencies. Moreover, a health policy takes care of hospital bills and pre- and post-hospitalization expenses. 

Wrapping It Up!

Both health insurance and term insurance have their own unique set of benefits. Both are important financials one must-have., but we have also discussed the Difference between Health Insurance and Term Insurance in above sections. Selecting a suitable cover for both policies become convenient if you assess your responsibilities, health state, occupation, age, and other related factors. Choose carefully after comparing the benefits of health and term plans and make an informed decision.

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