There’s a sense of absolute peace in knowing that even if your health experiences some unforeseen changes, you and your family have financial security. However, paying each month for both healthcare coverage and life insurance policy when the budget is tight can get problematic. As payments begin to climb up, it can be enticing to let go of one or the other to get by financially.
You’re probably reading this because of two reasons, you don’t know which one to buy, or you’re planning to drop the other one to make ends meet. In this article, we’re going to help you understand the difference between the two and which one you should buy according to your needs.
Life vs. Health Insurance Explained
Every type of insurance, nonetheless, serves an entirely different purpose and provides different coverage. When it comes to life insurance, it recompensates a death benefit to your beneficiaries in the case of premature death. The aim here is for the death benefit to be enough to replenish the future loss of income, as well as cover expenses and huge obligations including funeral costs, debts, and medical expenses—or to support college savings accounts or spousal retirement. This coverage will provide the family with the flow of their finances so they don’t find themselves having difficulty after death.
Meanwhile, health insurance can help pay for your medical expenses including hospital stays, doctor’s visits, tests, medications, and procedures. This will make sure that people can have the funds for their medical expenses and stay healthy.
The truth is, plenty of people actually need both types of protection, particularly if dependents are included. If this is the case, it would be better to limit coverage to what you honestly need so you can afford both kinds of insurance. Remember that your insurance needs can immediately change depending on the life stage you’re in. What may appear to be important for a parent with teen children may not be essential for a fresh college graduate or retiree.
Understanding the Purpose of Life Insurance
The primary objective behind choosing life insurance is the life cover it provides to a policyholder. The policyholder’s goal is to make sure that his dependents/family won’t have to change their lifestyle in his absence. In the possibility of an event, returns from the life insurance coverage will replace his income letting his family members live a normal life as far as the household funds go.
Understanding the Purpose of Health Insurance
Health insurance focuses on covering the real cost of treating medical conditions/illnesses subject to the sum assured. This health insurance has no life cover, which means that you won’t receive any payout on death.
Who Gets Paid?
When it comes to life insurance, payments are done directly to the policyholder. Health insurance payments are directly made to medical experts for prescriptions or services.
When Do They Get Paid?
For health insurance, the payments take place after billing for a procedure, medical appointment, prescription or hospitalization. Meanwhile, life insurance gets paid after a particular event takes place. For instance, term life insurance is paid upon death and critical illness insurance pays out following your diagnosis.
How Much Do They Get Paid?
The amount to be paid for life insurance is listed in the policy, so be sure to check that out. Health insurance amount, on the other hand, depends on what is required to pay medical costs, minus any deductibles and copays outlined in the policy.
What Can the Money Be Used For?
The money of health insurance is used for medical bills while the money for life insurance is used for anything and there are no conditions on how funds can be used.
How Do I Know If I Need Both?
Now that you know the specific benefits of the two kinds of insurance, you can consider including both in your portfolio. If you have financial responsibilities towards your family, a life cover is necessary. You should choose a policy that covers enough your liabilities and answers your household expenses—an amount considered as effectively his ‘human life value’.
Health insurance can also give you comfort from medical contingencies that can unexpectedly happen any time and can place your finances under substantial stress. If you are still undecided about getting two different covers, it would be best if you consult with a trusted financial planner to understand the many insurance options you can have that suits your needs and the span of the cover under each option.