How are Health Insurance and Term Insurance Different From Each Other?

In recent years, both term insurance and health insurance have witnessed a rise in takers. Today, more than ever, are people aware of the benefit of financial coverage. But you may wonder, how are term and health insurance different from each other? Read on to find out.

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1. The difference in insurance objective –

a. Term insurance:

This is basic life insurance offering your family financial coverage upon your demise, by providing a pre-defined lump sum of money. Today online term insurance plans are arguably the most popular type available as they are highly affordable.

Basically, a term plan is a protection plan to save your family from financial difficulties in case of your early death. This is a death benefit plan!

b. Health insurance:

Health insurance plans are contracts between the insurance provider and the insured person wherein the insurer will cover their medical-related costs in exchange for a fixed premium. The financial coverage here depends on the scope of the plan.
Basically, a health insurance plan is also a protection plan to save your family from financial difficulties in case you or anyone in your family falls ill. This is a survival benefit plan!

2. The difference in premium amounts –

a. Term insurance:

Term insurance is popular as it is quite inexpensive. Even for older individuals, term insurance is still affordable as it is a very basic insurance type with no bells and whistles. 

b. Health insurance:

Premiums for health insurance tend to be steeper than term insurance. Medical costs are high and insurance providers must be able to meet those costs. This results in higher premiums. However, if you buy health insurance when you are young then you will get the benefit of lower premiums.

3. The difference in tax benefits –

a. Term insurance:

The premiums of offline or online term insurance plans are tax-deductible under Section 80C of the Income Tax Act. The limit for the tax deduction under this heading is Rs 1.5 lakh

b. Health insurance:

A tax deduction is also allowed on health insurance premiums under Section 80D of the Income Tax Act. Under this section, an insured person can claim a tax deduction of up to Rs 25000 on their health insurance premiums every year.
For senior citizens, the deductible amount increases to Rs 50000 per year.
If you and your parents are both below 60 years of age, you can claim a tax deduction of Rs 25000 for yourself and Rs 25000 for your parents. If you and below 60 and your parents are over 60 years of age, you can claim a tax deduction of Rs 25000 for yourself and Rs 50000 for your parents. If you and your parents are over 60 years of age, then you can claim a tax deduction of Rs 50000 for yourself and Rs 50000 for your parents.

4. The difference in renewal benefits –

a. Term insurance:

There are no renewal benefits with these plans; the policyholder just pays the same premium amount each year.

b. Health insurance:

Health insurance plans offer a No-Claim Bonus (NCB) at the time of renewal if you have not made an insurance claim in the previous year. 

Summing up

Both term insurance and health insurance are beneficial for every individual. At the same time, you cannot purchase one in lieu of the other as they serve different functions. They should hold a place in your insurance portfolio offering you the benefits of life and health insurance coverage.

Also read: Best Term Insurance Plan With Return Of Premium In India | The Necessity of Health Insurance for Asthma Patients | Group Health Insurance vs Individual Health Insurance Policy in India – How to Find the Best One

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