Insurance provides a financial safety net for your family. Even for the wealthy, having appropriate insurance is a wealth protection measure to safeguard their assets against any adverse circumstances. The most important insurance that you should have is Life Insurance and Health Insurance. One of the common questions asked by many is – Should I buy health insurance or life insurance for my family?
Let us understand more about Life Insurance and Health Insurance.
What is Life Insurance?
Life insurance pays out a monetary benefit to your family in case of your demise. This is also called a Life Cover. The purpose of this is to ensure that your family/dependents carry on the same lifestyle and achieve the same financial goals, by creating an income stream from the benefit received.
What is Health Insurance?
Health insurance is a type of insurance that pays the actual cost of medical and hospitalization expenses for you and your family throughout life.
Which one is important?
Life Insurance and Health Insurance are different products serving different purposes. Life Insurance is to help your family to maintain their lifestyle in case of your demise. Health Insurance is to protect your current wealth from getting consumed by any medical contingencies when you are alive.
So, you need to have sufficient coverage under both these insurances.
Difference between Life Insurance and Health Insurance
| Life Insurance | Health Insurance | |
| 1 | It is a monetary benefit to be paid to your family in case of your demise. | It reimburses the cost of medical contingencies of you and your family when you are alive. |
| 2 | The benefit can be utilized by your family to meet their lifestyle and financial goals. | It will help you to protect your assets from getting utilized for medical expenses. |
| 3 | Should be taken if you have financial responsibilities towards your family or have liabilities. | Should be taken for you as well as all your family members irrespective of your financial situation or age or income level or health condition. |
| 4 | Insurance Cover is against the risk of death. | Insurance cover is against the risk of hospitalization and medical expenses. |
| 5 | You can claim tax exemption under Section 80C of the Income Tax Act. | You can claim tax exemption under Section 80D of the Income Tax Act. |