Difference between Health Insurance & Term Insurance Plans

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Difference between Health Insurance & Term Insurance Plans

Max Bupa

13 November 2020

No one plans to fall ill or have an accident, and face the financial difficulties that can arise from these unfortunate events. It can be taxing on both the individual and their family, particularly since the rise of hospitalisation expenses is currently estimated to be twice the inflation rate. To help protect against this, getting a health insurance or term insurance is crucial. But what exactly is the difference between Health Insurance and Term Insurance?

While there are a number of benefits of health insurance plans and term insurance, the primary reason why someone should opt for either is the added layer of protection on one’s finances in the event that an unforeseen circumstance were to occur. This could be with respect to a smaller procedure such as an appendicitis or even untimely death due to a road accident. We never think of simply ourselves while planning for such things, and family being an important part of our lives, it is crucial to plan for their care in the event that the primary earning member of the household passes away. Such events create emotional turmoil without a doubt, so why create any added stress on one’s finances as well?


What is Health Insurance?

A health insurance policy provides financial aid when an individual incurs medical expenses due to an accident or illness.


There are broadly two kinds of health insurance:


1. Mediclaim Insurance: 

This is a base medical insurance that accounts for any hospital expenses that may be incurred while receiving treatment at a hospital either due to an illness or an accident. This means that if an individual undergoes surgery, the treatment can be paid for through mediclaim. Additionally, it often accounts for family members as well if one opts for family health insurance plans and it usually includes coverage for a number of other services as well such as post-hospitalisation expenses and follow up check


2. Critical Illness Cover: 

This type of medical insurance caters to individuals who seek cover against long-term, life threatening diseases.


What is Term Insurance?

Term insurance, on the other hand, is a form of life insurance policy. This means that if the policyholder passes away during the specified period of the policy, the individual’s beneficiaries will receive an assured sum as a death benefit allowing them to maintain their lifestyle, meet financial obligations and continue pursuing financial goals. The death benefit serves as an income in case the individual was a primary earner, but also the sum can be put towards a goal such as a child’s education. Term insurance is a life insurance policy that occurs only for a specified period and is often opted for when someone has a health scare and would like to be on the safe side. 


Difference between Health Insurance and Term Insurance-

While both provide protection against financial strain, here are a few key differences between health insurance and term insurance - 


1. Purpose :

Health insurance is meant to provide financial aid in case the policyholder requires medical treatment either due to an existing condition or due to an emergency. Term insurance is meant to provide a safety net for family members in case the policyholder passes away during the term of the policy and provide them with a death benefit which could allow them to continue living their lifestyle in a comfortable manner.


2. Payment :

Health insurance provides a sum based on the treatment required by the individual while receiving treatment for an illness or injury. Term insurance provides an assured sum as a death benefit if the policyholder passes away specifically during the course of the policy.


3. Premium Charges:

Health insurance premium tends to be higher in comparison to term insurance which is can be low for similar amount of cover.


4. Maturity Benefits :

 With health insurance, if one does not avail of the services provided within a year, the amount can roll forward to the next year to create benefits such as reduced premium payments and additions to the sum assured.


5. Investment Plan :

Term insurance does not work like an average investment policy, however if the policyholder outlives the term insurance plan, they may be able to get their premium payments back at the end of the policy providing the plan has a premium return policy. On the other hand, some insurance providers can have the option of market linked health insurance policies which would serve as an investment in addition to the financial safety. 



Regardless of one’s current health status and financial situation, a health insurance policy, and a life insurance policy such as a term insurance plan are essential in today’s world. While buying a health insurance policy, always compare health insurance plans to ensure that the one that is finally chosen reflects all your goals and financial needs and that you fully understand all the aspects of your health insurance plan before opting for it.

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