Life Insurance vs. Health Insurance

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Each type of insurance plan serves a different purpose and safeguards different necessary elements of one’s life. In order to make sure that your family and loved ones are safe against the strokes of uncertainties, it is crucial to building a structured risk management portfolio. A well-versed risk management portfolio consists of a combination of different insurance products that kept together protects an individual against uncertainties on the trail of life.

When it comes to choosing the right insurance tool, insurance seekers are often confused due to the wide variety of options available. However, the choice of the insurance product should ideally be dependent on some vital factors like the goal of an individual, time horizon of insurance, the sum assured affordability and flexibility of the plan.

A common dilemma faced by insurance seekers is choosing between life insurance policy and health insurance policy. Both the insurance-based tools are extremely important yet one must keep in mind that they serve different purposes. In this thread, we will shed light on the differences and utility of life insurance policy and health insurance along with their pros and cons.

Life Insurance Policy

We all work hard during the economically productive years of our lives to build a corpus for our loved ones so that they do not struggle for their financial needs once we are not around to look after them. Life insurance policy can be considered as a personal safety tool that provides a blanket of financial protection for your family members and loved ones.

In simple terms, a life insurance plan is defined as an agreement between two parties i.e. insurer and insurance provider that ensures a death benefit in case of any unfortunate event that leads to the demise of the policyholder. In return to the assurance of financial security the policyholder pays a fee at fixed intervals known as premium. As life insurance policies provide financial security for your family they can be considered as savings cum insurance plans.

Types of Life Insurance Policies

There are different types of life insurance policies, however, on a broad scale life insurance policy can be classified into three categories-

  • Whole Life Insurance- These plans typically come with fixed payable premiums and sum assured to the nominee. The cost of these plans is less than universal life insurance policies and higher than term insurance policies mainly due to their consistency and no risk approach for a customer. Very often whole life insurance policies allow insured parties to opt for a loan which is an added-on advantage of these plans.
  • Universal Life Insurance- Universal life insurance policies are quite similar and structure and work in the same way as that of whole life insurance policies. In the case of universal life insurance policies, the nominee of the policyholder is entitled to receive a death benefit in case of the untimely demise of the policyholder. The major difference between universal life insurance policies and whole life insurance is the cost. These plans are expensive than conventional whole life insurance policies as they allow applicants to add more cash value to the sum assured. The nature of investment in the case of these plans adds to the degree of risks associated with the policy which is the main reason behind flexible premiums.
  • Term Life Insurance Policy- Term Insurance policies are one of the simplest, affordable and flexible forms of insurance products available in the UAE. These life insurance policies offer coverage for a given period of time that is known as the term of the policy. Applicants can choose the term and sum assured of the policy based on their convenience. These plans are pure risk management tools and have no maturity benefits associated with them.

Health Insurance Plans

Health insurance plans are quite a different form of traditional life insurance policies. The primary objective of getting a health insurance plan is to ensure financial assistance amid medical emergencies. A health insurance plan may be defined as an agreement between the insured and the insurer that provides coverage during medical needs. In return to the assurance, the insured party is supposed to pay a fee in the form of premium similar to life insurance policies.

With the right health insurance in place, one can choose to get cashless hospitalization or reimbursement for the medical expenses incurred during the treatment.

Types of Health Insurance Plans

Here’s a quick rundown on different types of health insurance plans in the UAE-

  • Personal Health Insurance- Personal health insurance aka individual health insurance is a type of health coverage that is designed and developed for a single person. The plan provides necessary coverage against various critical and terminal illnesses, expenses of hospitalization, accidental coverage along with various other medical complications that may arise during one’s lifetime.
  • Family Health Insurance Plan- A family health insurance is a type of health insurance policy that is designed and developed to encompass various medical needs of the entire family. The plan provides vital coverage against illnesses, accidents, medical emergencies, and hospitalizations that one’s family members might come across during their lifetime.
  • Senior Citizen Health Insurance- This is a special type of health insurance plan that is specially designed for senior citizens or people above the age of sixty. The senior citizen health insurance plan is designed and developed in such a way that it takes care of all the major needs of people falling into that age bracket.

Benefits of Life Insurance Policies vs. Health insurance Policies

Life Insurance Benefits

Health Insurance Benefits

Financial Security during phases of financial instability

Financial assistance during medical emergencies and treatments

Guaranteed death benefit

Guaranteed Medical Assistance

Add-on riders to enhance the strength of the basic plan

Add-on riders to enhance the strength of the basic plan

Monthly Income benefit to managing expenses post demise

Pre and post hospitalization coverage

 The death benefit can be used to settle outstanding debts and financial obligations

Maternity benefits

Critical and Terminal Illness coverage

Critical and Terminal Illness coverage

Quick claim processing

Quick claim processing along with cashless hospitalization

You may also like this - Term Plan Vs Medical Insurance: Which one is better?

 In a Nutshell

Both life insurance policies and health insurance are vital to building a strong portfolio. Both of the types of plans come with their pros and cons. While choosing a health insurance or life insurance policy one should focus upon their individual set of requirements and needs. Furthermore, it is very important to ensure that plan one purchases fits in their budget and helps them to accomplish their goals at an accelerated pace without adding financial burden over the applicant.

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