Health Insurance vs Term Insurance: Why You Need Both for a Secure Future?

Many people assume that one type of insurance is enough — either health insurance to handle medical expenses or term insurance for life protection. Some even believe that their employer’s group health plan is sufficient, or that life insurance can wait until later. 

However, both health and term insurance serve different but equally vital roles in safeguarding your financial future. To build a solid financial foundation, it’s essential to understand what each policy offers and why you need both.

What Is Health Insurance?

Health insurance is a policy that offers financial coverage for medical expenses incurred due to illnesses or accidents. It typically covers hospitalisation costs, surgery fees, diagnostic tests, pre- and post-hospitalisation care, ambulance services, and sometimes alternative treatments like AYUSH.

Key Features:

• Protects against medical inflation: With healthcare costs in India rising over 10% annually, even a short hospital stay can cost lakhs.
• Types of plans:
  • Individual Plans: Cover a single person
  • Family Floater Plans: One sum insured shared across family members
  • Top-Up Plans: Provide additional coverage after the base sum is exhausted
• Cashless hospitalisation: Many insurers offer a wide network of hospitals where you can get treated without paying upfront.
• Tax Benefits: Premiums are eligible for tax deduction under Section 80D — up to ₹25,000 (or ₹50,000 for senior citizens).

Health insurance acts as a safety net that ensures your savings and investments remain untouched during medical emergencies.

What Is Term Insurance?

Term insurance is a pure life insurance product that provides financial protection to your family in case of your untimely death. It pays a lump sum (sum assured) to the nominee if the policyholder dies during the policy term.

Key Features:

• Affordable premiums: Offers large cover (e.g., ₹1 crore) at low monthly costs.
• No maturity benefit: If the policyholder survives the term, there is no payout (unless return-of-premium option is selected)
• Ideal for income earners: Ensures your family can maintain their lifestyle, repay loans, and fund future needs.
• Customisable add-ons:
  • Critical illness rider
  • Accidental death benefit
  • Waiver of premium
• Tax Benefits:
  • Under Section 80C (up to ₹1.5 lakh) for premiums
  • Death benefits are tax-free under Section 10(10D)

Term insurance ensures that your family doesn’t face financial hardship in your absence.

Key Differences Between Health Insurance and Term Insurance

Why Should You Have Both Health & Term Insurance?

Relying on just one type of insurance leaves you exposed to major financial risks. Here’s why combining both health and term insurance is essential for complete protection.

1. They Cover Different Risks

Health insurance covers medical emergencies while you’re alive. Term insurance steps in only after your passing to support your family. Having just one of them means you’re exposed to risks the other covers.

2. Employer Coverage Is Not Enough

Relying solely on an employer-provided health plan is risky. You lose it if you leave the job or retire. A personal health policy ensures lifelong protection.

3. Financial Planning Needs Balance

Combining both insurance types ensures you’re protected on all fronts — health, income, and family security. Start small and upgrade as your financial capacity grows.

Example:
A 30-year-old can get a ₹1 crore term cover for ₹600–800/month. Simultaneously, a ₹5 lakh health policy for an individual may cost around ₹8,000–10,000/year. Both can fit in your budget while offering immense protection.

Conclusion

Health insurance and term insurance are not interchangeable. One shields you from rising healthcare costs, and the other ensures your loved ones are taken care of if you’re gone. They work together to create a complete financial safety net. For a secure and stress-free future, invest in both policies early, customise them to your needs, and review them regularly as your life and responsibilities evolve.