In today's times, it is paramount to have an insurance cover to safeguard your finances from various unforeseen risks. An insurance cover not only helps you protect your assets but also helps protect your health and life. In India, most people still consider insurance as a burden and try to postpone buying an insurance until they are 40 years or above.
Most people also debate which is better – health or life insurance.
Experts recommend that everyone must have both health insurance and life insurance in their portfolio. Both serve different purposes. While health insurance covers the cost of treatment of various illnesses, life insurance helps your family reduce the financial burden in the event of your untimely death.
If you are deliberating what insurance to buy, knowing their differences will help you make an informed decision.
- Life Insurance is designed to provide financial assistance to your family in the event of your sudden demise. It pays a lump sum amount, which is equal to the sum assured of the policy to the appointed nominee. The amount can be used to pay off the debts (if any) and help your family maintain their healthy lifestyle without any compromise. Additionally, knowing that your family will have financial protection even in your absence, you can be at peace.
- Apart from providing death benefits, some life insurance policies have a pension plan provision. The plan is an excellent choice for building a retirement corpus and a must-have in your investment portfolio. The plan provides annuity payment at periodic intervals and allows you to secure your post-retirement life.
- Some types of life insurance policies like ULIP (Unit Linked Investment Plan) allow you to invest in the money market instruments. Based on your investment goals, and risk appetite, you can choose to invest in debt funds, equities and bonds. Thus, you get the dual benefits of market-linked returns as well as life protection.
- One of the significant benefits of a life insurance policy is that it is a legitimate way to reduce your tax liability. The amount you pay towards the life insurance premium is exempted from tax under Section 80(C) and Section 10(10D) of the Indian Income Tax Act, 1969. You can get a maximum exemption up to 1.5 lakh INR.
- Health insurance plans help you take care of the sudden expenses that may crop up due to a medical contingency, which leads to hospitalisation. It protects you from the costs incurred on ambulance fees, doctor consultation charges, surgery, etc.
- In context of rising cost of medical treatment, sudden medical expenses can severely affect your savings. Having a sufficient health insurance policy can help you meet the expenses without depleting your savings and compromising on the quality of healthcare services.
- Most insurance companies in India have two modes of payment for health insurance policies – cashless treatment and reimbursement. If you opt for a cashless treatment plan, you need not pay a single penny; the insurer will directly settle the bill with the hospital. However, to avail this facility, you must get treatment from one of the hospitals that is part of the insurers' network. Under the reimbursement plan, you pay the bill initially, and the insurance company will reimburse the amount later.
Thus, both life insurance and health insurance cater to different needs and offer distinct benefits. Thus, it would be best if you had both life and health insurance policy for comprehensive protection.