Term Insurance vs Health Insurance: Which is Better?

When comparing term insurance vs health insurance, evaluating your personal and family needs is essential: term insurance secures your family's future, while health insurance protects your present medical well-being. Ideally, both should be a part of a comprehensive financial plan.

Term Insurance vs Health Insurance 

There are some factors that tell the difference between term insurance and health insurance plans:

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

Let us understand the comparison between term insurance vs health insurance by taking a look at the need for term insurance and health insurance, its types, and its benefits:

Note: You can easily calculate the term plan premium by using the term insurance calculator online tool.

What is Term Insurance?

Term insurance is a type of life insurance that provides financial protection for a set period, or "term." The nominee receives the sum assured if the policyholder passes away during the policy term. It is an affordable way to secure your family’s financial future, offering high coverage at low premiums. However, if the life assured survives the policy term, there are no maturity benefits unless you opt for a return of premium plan.

What is Health Insurance?

Health insurance covers medical expenses for treatments, hospitalizations, and surgeries. It ensures that in case of illness or injury, the policyholder doesn't have to bear heavy medical costs out of pocket. Health insurance can cover everything from doctor visits and medications to more serious conditions requiring hospital stays or surgeries, depending on the terms and conditions of the policy. It protects you from rising healthcare expenses and helps you access quality medical care.

Types of Insurance Policies

Let’s discuss the types of term insurance plans and health insurance plans:

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. There is no maturity benefit limit to this type of term insurance plan.

• Term Return of Premium Plans – With these plans, the nominee will receive the death benefit on the death of the policyholder during the policy term, and the policyholder will receive a return of premiums on surviving the policy tenure.

• 100% Refund of Premium at No-cost – These plans allow you to exit the plan early at a specific stage and receive all the premiums paid during the policy tenure. 

• Whole Life Insurance Policy – These plans provide coverage against death for the policyholder’s entire life i.e., till 99/100 years of age. During this tenure, if the policyholder suffers an unfortunate death, the sum assured is paid to the policyholder’s family.

Types of Health Insurance Policies 

• Individual Health Insurance – This policy covers a single person in case the policyholder is diagnosed with a critical illness or is unable to pay for a medical expense like hospitalisation or treatment costs.

• Family Floater Health Policy – Under this plan, the whole family, along with the life assured, is covered under a single policy. For example: If a family of 4 purchased mediclaim insurance, all the members, including the kids, will be covered under the plan, and the policy will pay the compensation benefit for all the members of the family.

• 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. These plans provide coverage for individuals over the age of 60 years old.

• Critical Illness Insurance – Critical illness insurance provides a financial benefit to the policyholder in case they are diagnosed with a life-threatening illness like a heart attack, cancer, kidney failure, or other such illnesses. 

• Top-up Health Insurance Plans – These plans can be purchased on top of your existing health insurance plans and provide additional coverage in case you exhaust your current health insurance limit.

• Maternity Insurance Plan – These plans cover the costs incurred during pregnancy like pre and post-natal care, cost of delivery, medicines, medical tests, and newborn baby expenses.

• Cancer Insurance Plan – The cancer insurance plan covers the expenses that come with the diagnosis of cancer. For example, expenses like diagnosis, hospitalisation, treatment, chemotherapy, surgery, and radiation therapy are covered under this plan.

Benefits of Health Insurance and Term Insurance Plans

Both term insurance and health insurance offers various benefits to you and your family. Here is a list of key benefits:

Benefits of Term Insurance Plans

You can take a look at the following benefits of term insurance to get a better understanding of the difference between term insurance vs health insurance plans:

• Term insurance plans provide a death benefit to your nominee in case of your unfortunate death during the policy term, which can help them take care of their financial obligations.

• These plans typically do not provide a maturity benefit with their regular term plans, but with the term return of premium plans, you can get a return of all the premiums paid throughout the policy term.

• Term insurance tax benefits help you save on your yearly taxes u/s 80C and 80D and offer a tax-free benefit to your family in your absence with section 10(10D).

• These plans offer the option of enhancing the base coverage with optional riders that you can include at nominal premiums.

• There are several types of term insurance plans available from which you can select the one best suited for your needs.

• With these plans, you can secure a large sum assured at affordable premiums for a long policy tenure.

Benefits of Health Insurance Plans

You can understand the difference between term insurance vs health insurance by taking a look at the benefits of health insurance plans:

• Health insurance plans cover pre and post-hospitalisation charges up to the sum insured limit

• These plans cover diagnostic expenses like scans, tests, medications, ambulance, daycare procedures, and more.

• You can add the critical illness cover as an add-on or as a standalone policy

• Some health insurance plans also offer maturity benefits that cover the expenses incurred during delivery and new born baby expenses.

• Home or domiciliary treatment costs are also covered in some health insurance plans

Who Should Choose Term Insurance vs. Health Insurance?

Which is Better - Health Insurance or Term Insurance in 2025 ?

Consider both options: You might need both to make sure complete protection is there, as health insurance covers medical expenses and term insurance plans offers protection in case of your demise. 

Consult with an insurance expert/advisor: They help you evaluate your requirements and determine the best possible combination of insurance plans that suits you. 

Example: A young couple with a child and a home loan should consider having both health and term insurance. Health insurance helps cover unforeseen medical expenses for the entire family, while term insurance ensures the mortgage is paid off and the child's future is financially secure if either parent passes away.

Can I Buy Both Term and Health Insurance?

Yes, you can and should have both term and health insurance for complete financial protection. Each serves a unique purpose: term insurance secures your family’s financial future by providing a lump sum in case of your death, while health insurance protects you from high medical expenses. Having both ensures that your loved ones are taken care of in the event of your untimely death and that medical costs don’t drain your savings in case of an illness or accident. This combination provides a well-rounded safety net, covering both life and health risks.

Is Term Insurance Enough for Your Family’s Security?

• Provides financial protection: Term insurance offers a lump sum payout to support your family if you’re no longer around.

• Covers large expenses: Term plans help pay off debts like home loans, ensuring your family isn’t burdened.

• Secures your children’s future: The death benefit payout can be used for education, marriage, or other long-term goals.

• Helps maintain lifestyle: The sum assured from term insurance can ensure your family can continue their current standard of living.

• Helps in medical emergencies: with the term insurance critical illness cover, the rider offers coverage against a variety of major and minor illnesses and pays out an additional sum on the diagnosis of any of the covered illnesses.

How to Buy Term Insurance from Policybazaar?

You can buy term insurance plans from Policybazaar by following the below-mentioned steps:

• Step 1: Go to the Term insurance form

• Step 2: Enter your name, gender, DOB, and contact information

• Step 3: Fill in your smoking habits, occupation types, annual income, and educational background

• Step 4: Select the most suitable term plan and proceed to pay

Wrapping It Up!

Both term insurance vs health insurance have their own unique set of benefits as they both are important products to have in one’s financial portfolio. You can go through the difference between term insurance and health insurance in the above sections to understand the importance of each type of policy. Selecting a suitable cover for both policies becomes convenient if you assess your responsibilities, health state, occupation, age, and other related factors. Choose carefully after comparing the benefits of term insurance vs health insurance to make an informed decision.

Note: Check all the best term insurance plan in India.

Note: You should also check the benefits of term life insurance if you are planning to purchase the term insurance plan.

FAQs