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Insurance plays an important role in building financial security and reducing uncertainty during challenging times. Life and health insurance are two common types of insurance. However, people often get confused between them, but each one serves a different purpose. Life insurance provides financial support to the family in case of the policyholder’s death. Health insurance helps in covering medical expenses when an individual requires treatment or hospitalisation.Income Tax GuideIncome Tax Slabs FY 2025-26Income Tax Calculator 2025New Income Tax Bill 2025What is life insuranceLife insurance is an agreement between an individual and an insurance company. Under this arrangement, the policyholder pays regular premiums to the insurer for a selected term. In case of the policyholder’s death during the policy period, the insurer pays an assured amount to the nominee or beneficiary. This payment helps the family cover their daily expenses and long-term goals after the demise of the earning member.Life insurance is mainly about creating financial safety for dependents. It ensures that the family receives support during unexpected circumstances. This makes it especially important for individuals who have dependents relying on their income.What is health insuranceHealth insurance is a contract that covers medical expenses when the insured person requires treatment. The policyholder pays premiums to the insurer, and in return, the insurer pays for hospitalisation costs, surgery charges, or treatment expenses, depending on the policy terms. This support helps reduce the financial burden during medical emergencies.Health insurance policies usually cover a wide range of medical needs. These may include expenses incurred before, during, and after hospitalisation. Some policies also cover critical illnesses such as cancer, kidney failure, or heart disease, where treatment costs are often higher. Many plans also provide cover for maternity expenses or regular health check-ups.Another important feature of health insurance is the cashless facility. It allows the insurer to directly pay the hospital costs when the treatment takes place in a network hospital. This feature helps reduce the need to arrange funds at short notice. Overall, health insurance focuses on medical care and ensures financial assistance during illness or accidents.Types of life insurance and health insuranceLife insurance also includes different types of life insurance that cater to various needs. Some policies provide only protection, while others combine savings or investment with protection. For example, term life insurance offers financial cover for a specific time at an affordable premium. Whole life insurance provides lifelong protection, while other plans may include maturity benefits. These options allow individuals to select policies based on their objectives and financial situation.Health insurance offers various types of plans, including individual health insurance, family health insurance, and critical illness insurance, which provide coverage for medical treatment, hospitalisation, and expenses related to illnesses.Difference between life insurance and health insuranceThe difference between life insurance and health insurance is as follows:Purpose of coverageLife insurance offers financial support to the family if the policyholder passes away. Health insurance covers medical expenses arising from illnesses, injuries, or hospitalisation needs during the policy term.Beneficiaries of the policyIn life insurance, the nominee receives the assured sum if the insured person passes away. This helps family members manage living costs or repay debt. In health insurance, the benefit is used to pay for medical or hospital expenses.Duration of policyLife insurance plans are generally purchased for the long term. However, if the policyholder passes away during the policy term, the nominee receives the death benefit, and the policy ends as per the terms and conditions. Health insurance policies are usually active for one year and require renewal annually. Without renewal, the coverage stops.Types of expenses coveredLife insurance covers future financial security by offering a lump sum to beneficiaries. It does not deal with day-to-day medical costs. Health insurance focuses only on health-related expenses, such as hospitalisation or surgeries. It does not provide direct financial support to family members after the policyholder’s death.Tax benefitsThe provision of tax benefits also differs for life and health insurance policies. Premiums paid towards life insurance may be eligible for deductions under Section 80C of the Income Tax Act, while health insurance premiums may qualify for deductions under Section 80D.Life insurance and health insurance address different risks in life. Life insurance protects dependents by providing a sum after the policyholder’s death. Whereas health insurance covers costs during illnesses or hospitalisation. Both types require careful planning when selecting policies, considering factors like age, coverage needs, and duration. Trusted platforms like Tata AIA offer various life insurance and health insurance plans. Understanding how each works can help individuals choose a suitable plan that aligns with their needs.Disclaimer: The information provided above is for informational purposes only and is not intended as professional or legal advice. The Insurance Regulatory and Development Authority of India (IRDAI) is not responsible for any decisions made based on the information.
