Term Insurance Vs Medical Insurance – Which One to Choose?

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  | Published: 23 November 2019 | Last Updated On: 26 July 2021

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As we all know, insurance is a necessity and helps us deal with unforeseen financial and medical circumstances. But not all insurance policies are the same, as they serve different purposes.

Term Insurance and Medical Insurance are the two most confusing policies among youngsters. The term insurance policy offers financial support to your family in case of your sudden demise. The medical insurance policy, on the other side, assures insurance cover for your medical illness in case you need to go through prolonged hospitalisation or suffer from a critical illness.

Both term insurance and medical insurance are different in terms of premium, benefits, purpose, applicability, scope, etc. Let us go ahead and learn about these insurance policies in detail, along with the significant differences between them.

What is Term insurance?

Term insurance is a contract between the insured and the insurer to provide the sum assured to the beneficiary in case the insured person passes away. With term insurance plans, you can take care of your family even when you are not around. The primary purpose of buying a term insurance policy is to provide your family with the financial support they need in case of your unfortunate demise.

Term insurance plans help the policyholder’s family get enough funds to carry out their expenses and maintain their standard of living even after losing the earning member.

Here are a few primary reasons for buying a term insurance plan.

  • To provide your family with a financial security
  • To get additional financial cover at a reasonable premium amount
  • To save your family from the unforeseen financial crisis

What is Medical Insurance?

Medical insurance is a type of contract between the policyholder and the insurance company. As per the contract, the insurance company provides coverage against all the medical expenditure for the policyholders if they get hospitalised, are sick or need any kind of medical intervention.

The terms and conditions of the medical insurance policies differ from insurer to insurer. These medical insurance policies help policyholders stay financially secured against unforeseen medical emergencies.

Here are the primary reasons for buying medical insurance.

  • To manage the fluctuating medical treatment costs
  • To deal with your medical expenses
  • To get quality treatment
  • To protect your savings and stay financially strong
  • To fight lifestyle diseases more effectively

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Term Insurance vs. Medical Insurance

To provide your family with financial and medical security, you need both term and health insurance policies. Here are the main differences between term insurance and medical insurance.

Categories

Term Insurance

Medical Insurance

Type of Insurance

This is a type of life insurance.

This is a type of general insurance.

Premium Amount

Term insurance plans offer minimum and affordable premium amounts for the policyholders.

Medical insurance policies are expensive after a certain age. It is advisable to buy medical insurance at a younger age so that you can avail it at a reasonable amount of premium.

Objective

Term insurance plans offer financial support to your family after your demise. There are no benefits while you are still alive.

Medical insurance offers financial support to deal with the huge expenses of medical emergencies.

Policy Renewal

The policyholder does not need to renew the term insurance policy. With a term insurance plan, they need to pay the same amount of premium every year based on the schedule set up at the time of purchase.

The policyholder needs to renew the medical insurance policy every year and pay the updated premium amount starting from renewal.

Financial Support

With term insurance plans, the insurance companies provide a sum assured to the beneficiary in case of the policyholder’s unfortunate demise.

With medical insurance, there is no specific time frame to apply for the claim. It helps the insured deal with medical expenses as and when required.

Affordability

The premium amount for term insurance plans is usually low.

The premium amount for Medical Insurance Plans is usually high.

Maturity Benefit

Term insurance plans have no maturity benefit. They offer a sum assured to the beneficiary after the policyholder passes away.

In medical insurance, the policyholders get a no-claim bonus at the time of policy renewal if they have not registered any claim for the entire year.

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Now that you know the main differences between term insurance and medical insurance policies, let us learn them in detail to understand how they work.

Types of Term Insurance Policies

Here are the different types of term insurance policies in the UAE.

Level Term Insurance Plan

In the level term insurance policy, the premium remains the same throughout the year. The insurance companies offer level term insurance plans in four types of payment methods. Here is the list.

  • Regular Pay: In this payment method, the policyholders must pay the premium throughout the policy term.
  • Limited Pay: With the Limited Pay variant, the policyholders pay an insurance premium for a limited number of years, while the insurance policy is valid for a longer duration.
  • Single Pay: With this payment plan, the policyholder pays the total premium for the entire insurance policy right at the start of the term.
  • Return of Premium: In this variant, the policyholder receives a part of the total premium amount paid at the end of the policy term.

Annual Renewable Term Insurance Plan

In the annual renewable term insurance policy, the premium amount changes after a certain period or, sometimes, every year. Most insurance companies offer this term insurance plan at lower insurance premiums. However, it can be expensive if bought for a longer duration.

Types of Medical Insurance Policies

Here are the different types of medical insurance policies in the UAE.

Basic Medical Insurance Plans

A basic medical insurance policy in the UAE offers coverage for all the medical expenses for an illness or injury. The medical insurance companies in the UAE provide medical insurance plans with attractive features and benefits for both individuals and families. These medical insurance plans help policyholders cover the cost of treatment if they or their family members get admitted to the hospital.

The medical insurance plans in the UAE have different premiums based on the type of plan purchased. You can easily contact medical insurance providers in the UAE and find the insurance plan that best fits your medical needs.

Comprehensive Medical Insurance Plans

These insurance plans offer extensive financial coverage against medical expenses. The comprehensive medical insurance plans cover inpatient and outpatient medical expenses, including hospitalisation, doctor’s consultations, cost of medicines, diagnostics and tests, etc.

The best part about comprehensive medical insurance in the UAE is that it offers a specific amount of cover for osteopathy, homoeopathy, physiotherapy, etc. Moreover, some of these insurance policies also cover the expenses of a private ambulance and home nursing.

Another good thing about these medical insurance plans is that they allow the policyholders to add dental and optical covers to their plans by paying an extra premium amount.

Most insurance companies in the UAE offer comprehensive medical insurance plans for critical illnesses like cancer, stroke, paralysis, heart attack, coronary artery disease, major organ transplant, chronic lung disease, etc.

Comprehensive medical insurance includes different types of insurance such as family floater health insurance, individual health insurance, critical illness insurance, personal accident insurance, and many others. You can choose the medical insurance plan based on your medical needs.

Shariah-Compliant Medical Insurance

This type of medical insurance is also known as Takaful Medical Insurance. It helps members to contribute and collect enough funds to support each other’s medical expenses. Shariah-compliant medical insurance plans are based on Islamic law and support the fact that individuals must put effort and protect each other.

Shariah-compliant insurance plans offer both life and medical insurance benefits. If one of the members reports a claim, the amount gets paid from the fund created by other members.

Shariah-compliant medical insurance policies allow policyholders to contribute to mutual funds instead of paying monthly and annual premiums. There is an administrator who keeps the record of every member’s contribution and administers the claim on behalf of every other member. The administrator charges an agreed amount as a fee, just like the companies pay salaries to their sales and marketing teams.

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Benefits of Term Insurance

The term insurance plans offer a financial benefit to the policyholders’ families after their unfortunate death. Here are the primary benefits of buying a term insurance policy.

  • Simple Premium Schedule - The policyholders need not renew the term insurance policy or worry about the update in the premium amount. The term insurance plans have an easy payment schedule where the insurance premium amount remains the same. The policyholders in the term insurance policies schedule their payments based on their financial preferences.
  • Financial Support to the Family - Term insurance policies serve the primary purpose of providing the policyholder’s family with financial support when they lose the breadwinner. The beneficiary can use the provided sum assured to deal with their different expenses like child’s school fees, loan repayment, etc.
  • Affordable Premiums - Most insurance companies offer insurance plans for the benefit of the policyholder’s family. Of all the plans, the term insurance plan is the most affordable insurance plan that provides a considerable amount of sum assured by paying a reasonable premium in instalments.
  • Higher Returns - Term insurance plans with their valuable features and benefits fit into everybody’s requirements. The insurance companies pay the sum assured before the end of the policy term in case of the policyholder’s demise. Unlike other investment plans, term insurance offers more advantages than the total contribution made by the policyholders.

Benefits of Medical Insurance

Medical insurance offers you financial coverage against all the medical expenses after you get hospitalised.

Here are the primary benefits of medical insurance.

  • Pre and Post-Hospitalisation Benefits - The medical insurance plan offers insurance coverage against all the pre and post-hospitalisation expenses like medical tests, doctor’s consultation, ambulance charges, etc. The insurance companies in the UAE cover the expenses starting 30 days prior and 60 days post hospitalisation of the insured person. The days and the coverage amount vary from insurer to insurer.
  • Restoration Benefits - The medical insurance policies in the UAE allow you to restore the sum assured if you have exhausted the existing insurance amount on one of the family members’ treatment. The benefit works if the policyholder has the family floater insurance cover and the entire family uses one insurance plan.
  • Cover for Day-Care Procedures - Not all insurance companies offer the benefit of covering day-care procedures. However, some of them provide this benefit by paying an additional premium. These benefits include the expenses you incur in the hospital while staying there for less than 24 hours. A few day-care treatments done without hospitalisation include chemotherapy, nasal sinuses, orthopaedics, cataract surgery, etc.
  • Accident Cover - Most insurance companies offer personal accident cover with medical insurance plans. The insurance company will also cover the accident treatment under your medical insurance plan by adding this benefit.
  • Increased Sum Assured as No-Claim Discount Benefit -The insurance companies in the UAE offer no-claim benefits for the policyholders who don’t register any claim for an entire year. Based on their choice, the policyholders can either use this bonus to increase the sum assured or lower the premium amount.
  • Complimentary Annual Health Check-ups - Most medical insurance plans cover the annual health check-ups for the policyholders. This helps them focus on their health and stay in touch with their doctors. The policyholders can only use this benefit once a year and extend it for the coming year with the policy renewal.

Final Thoughts

Both Term Insurance and Medical Insurance Policies offer a wide range of features and benefits. While term insurance can provide financial help to your family after your death, medical insurance helps to cover your medical expenses during hospitalisation. And to sum up, we need both the insurance policies sooner or later.

To find the best-fit insurance policy, you must first figure out your needs. And once you know what you need, contact various insurance companies and compare the insurance plans offered by them to make the right choice.