Difference between Health Insurance Plans offered by Life Insurance and Health Insurance Companies

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Updated on Jul 13, 2022

The health insurance market has become competitive. Individuals are realizing the importance of having a health insurance plan as medical costs are rising on a regular basis. As such, insurance companies are joining the bandwagon and offering a health insurance plan. While earlier general insurance companies were offering health insurance plans, nowadays, there are various life insurance companies too which have joined the fray and are offering health insurance plans to individuals. Are the plans offered by health insurance companies and life insurance companies similar?

They are not. Though life insurance companies do offer health insurance policies, there are various differences in the policies offered by life insurers compared to those offered by general insurers. Do you know about the differences? Let’s find out:

Difference between health plans offered by health insurers and life insurers.

General insurance companies offer a range of health insurance plan. Common types of health plans offered by general insurers include the following:

  • Indemnity health plans: These plans provide coverage for various medical contingencies like room rent, treatment costs, pre and post hospitalization, ambulance charges, etc. These plans pay the actual medical expenses incurred and are thus called indemnity plans.
  • Fixed benefit plans: These plans cover specified contingencies and pay a fixed benefit irrespective of the actual cost incurred. Common examples are hospital cash plans which pay a fixed amount per day of hospitalization or critical illness plans which pay the Sum Insured in lump sum on diagnosis of the covered illnesses.
  • Senior citizen plans: These plans cover individuals aged 60 years and above and act as indemnity plans.
  • Illness specific plans: These plans cover specific illnesses or individuals suffering from specified ailments.

You can choose any plan based on your requirements.

Compared to this, life insurance companies offer only specific fixed benefit plans which may be for specific diseases or general hospitalization plans. You can find specially designed plans for cancer or for cardiac related ailments. There are critical illness plans too which cover listed critical illnesses.

  • Type of benefit paid: Health plans offered by general insurance companies usually pay the actual medical bills incurred. In some plans though, a fixed benefit is payable. Life insurance companies, on the other hand, pay only a specific benefit or lump sum benefit which is equal to the Sum Insured, depending on the fact whether the plan is a specific illness/critical illness plan or a general medical plan..The benefit paid, thus, does not depend on the actual costs incurred on treatments. You can, thus, use the benefit received from the health plan to pay off any financial obligations that you might have.
  • Tenure: Health insurance plans of general and health insurers are, usually, offered for one year after which they are renewable. However, currently, health insurance plans come with a 2 year or 3 year period too where you pay the premium in one lump sum and avail coverage for a continuous tenure of 1, 2 or 3 years. In case of health plans offered by life insurance companies, the tenure allowed is longer. These plans come with a fixed tenure ranging from 5 years to 10 years.
  • Renewability: Health plans offered by general insurers usually promise lifelong renewability if you renew them every year without fail. Health plans of life insurers do not have this lifelong renewability feature in their plans. They have a fixed tenure and when the tenure completes the plan comes to an end. If you want to continue, you have to buy the plan afresh if you are within the entry age limit prescribed by the company.
  • Premiums: Both life and health insurers’ health plans base their premiums on age, Sum Insured, your medical history, etc. However, premiums of health plans of general insurers do not, usually, change based on claim experience of the company. In case of life insurer’s plans, there is a claim-based modification in premiums after 3 years. The premiums might either increase or decrease based on the claim experience of the company.

Did you understand the differences? Health plans are offered by both health insurance companies and life insurance companies but both plans are different in various aspects. So, when choosing a health insurance plan, understand these differences and then choose a provider and a plan suitable to you.

Choose wisely!

Mar 03, 2021
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PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.

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