Life insurance vs health insurance: what’s the real difference?

To capture the opportunity in the retail health segment, ICICI Lombard has been increasing its distribution network by adding retail health agency managers.

Insurance can be confusing because policies sound similar but serve very different purposes. Life insurance and health insurance are two of the most important covers you can buy, yet many people mix them up or think one is enough. In reality, they complement each other. Understanding how they differ makes it easier to decide how much of each you need.

What life insurance does

Life insurance is designed to provide financial security to your family if you are no longer around. A term plan, the purest form of life cover, pays a lump sum to your nominees if you pass away during the policy period. The money can replace your income, clear debts, or help fund long-term goals like education or retirement for your dependents. Life insurance is about protecting your family’s future, not covering your current expenses.

What health insurance does

Health insurance, on the other hand, protects you and your family from the rising cost of medical treatment. It covers hospitalisation, surgeries, medicines, and sometimes even preventive care. Instead of dipping into savings during a health emergency, your policy pays the bills up to the sum insured. With healthcare costs climbing every year, this cover ensures you don’t face a financial setback while recovering.

Key differences

The simplest way to look at it is this: life insurance is about income replacement for your family, while health insurance is about expense protection for you. Life cover is triggered only by death, while health cover is triggered by illness or accident. Premiums also differ — life insurance usually gives high cover for relatively low premiums, while health insurance premiums depend on age, lifestyle, and medical history.

Why you need both

Relying on just one is risky. If you only have life cover, medical bills during your lifetime could drain your savings. If you only have health cover, your family could be left vulnerable if something happens to you. A well-rounded financial plan always includes both, with adequate coverage tailored to your age and responsibilities.

FAQs

Q1. Which should I buy first, life or health insurance?

Both are important, but if you have dependents, start with term life insurance. If you’re single, health cover may take priority until responsibilities increase.

Q2. Can I claim tax benefits on both?

Yes. Premiums for life insurance qualify under Section 80C, while health insurance premiums qualify under Section 80D of the Income Tax Act.

Q3. Do life insurance policies cover medical expenses too?

No. Life insurance only provides a payout in case of death. For medical costs, you need a separate health insurance policy.