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Know The Difference Between Term Insurance And Health Insurance

Many people remain unaware of the various insurance products and their benefits. When it comes to financially securing the future of your family, insurance products are one of the preferred investment cum insurance options available in the market right now. Most individuals have a hard time trying to understand the term insurance vs. health insurance concept. In fact, people may think they are the same. However, they are two distinct insurance products with different benefits and use cases. Here is an in-depth look into these two popular types of insurances.

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 7th July 2024
Modified on: 7th July 2024
Reading Time: 15 Mins
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What is a term insurance plan?

 

A term insurance plan offers pure protection. It is a life insurance product that provides you with a life cover for a specified period in return for regular and periodic payments known as premiums. In the event of your death during the term of the plan, the life insurance company would provide the nominees or beneficiaries of the policy with a death benefit.

The death benefit is a certain predetermined sum of money that is paid out by the insurer, which the beneficiaries can make use of as they see fit. This way, you can help safeguard your family’s future even when you are no longer alive.

The premium of term insurance plans is almost comparatively lower than other types of life insurance plans. This makes them one of the most cost-effective options for an individual to secure the financial future of their family.

 

What is health insurance?

 

A health insurance plan is a dedicated insurance policy that is designed to help you meet the expenses associated with healthcare and medical procedures.

When you opt for a health insurance policy with an insurer, you will be required to pay premiums regularly and periodically for a particular period. Moreover, in exchange for doing so, the insurer is obligated to offer you a cover for the medical and healthcare costs that you incur for the treatment of diseases and ailments.

With a health insurance policy, you can also provide your family members with the same coverage that you get to enjoy by adding them onto your plan.

Here is something that you should note. Not all health insurance policies cover all of the diseases and ailments known to man. Therefore, it is essential to read the terms and conditions contained in the policy document to ensure that you get coverage for as many ailments, diseases and costs as possible.

Let us quickly look at an example to better understand the concept of health insurance.

Assume that you opt for a health insurance plan with a coverage of up to Rs. 10 lakhs for a tenure of 5 years. You are required to make monthly premium payments to the tune of Rs. 5,000. Now, suppose that you get afflicted with a disease a couple of years later. The medical procedure, medication, and other costs for treating this disease come up to around Rs. 5 lakhs. Since you own a health insurance plan, your insurer is obligated to cover the cost of Rs. 5 lakhs.

 

Difference between term insurance and health insurance

 

Now that you know what these two insurance products are. Let us look at the various differences between term insurance vs health insurance –

Term insurance

Health insurance

Term insurance provides your family with financial protection in the event of your death.

Health insurance, on the other hand, protects you and your family from having to bear the medical expenses associated with the treatment of a disease or ailment.

It provides your family with a lump sum death benefit payment upon your demise. 

It reimburses or pays out the costs incurred towards a medical treatment as and when you need it. 

Since there are no maturity benefits associated with a term insurance, the premium that you get to pay is quite low.

The premium that you would have to pay for a health insurance policy tends to be a little higher. 

Term insurance plan does not come with a no-claim bonus benefit.

Health insurance policies may feature a no-claim bonus benefit that allows you to reduce the amount of premium that you pay if you have not filed for any claims in the previous year.

 

Benefits of term insurance

Now that you are aware of the differences between term insurance vs health insurance, here is a quick look at some of the term insurance benefits that you get to enjoy –

1. They are cost-effective

The premium that you are required to pay for a good term insurance plan is far lower when compared to other insurance products. For instance, you can even get a term insurance plan for a premium that is as low as Rs. 500 per month subject to policy terms & conditions.

2. They are very flexible

Depending on the plan you opt for, you can choose to receive the benefits of a term insurance policy either as a lump sum or on a monthly basis. If you choose to receive the benefits on a monthly basis, you may further have the option to choose to receive a fixed-sum each month or a monthly pay-out increasing yearly.

3. They come with the ability to add-on riders

You can enhance the benefits offered by a term insurance policy by opting to add on certain riders at a nominal extra cost. For instance, the critical illness rider provides you with an additional lump sum benefit if you are diagnosed with any one of the diseases mentioned in the rider document. This benefit is paid over and above the base policy’s sum assured amount.

4. They come with several tax benefits

One of the most important term insurance benefits is that it comes with several tax breaks. According to section 80C of the Income Tax Act, 1961 (the Act), the premiums that you pay towards a term insurance plan are eligible to be deducted from your total income to the tune of Rs. 1.5 lakh each financial year. That is not all, the death benefit that your nominees or your beneficiaries receive is also completely exempt from taxation under section 10(10D) of the Act. The above deductions and exemptions are subject to the provisions contained in the Act.

 

How term insurance with a critical illness rider works

 

As you have already seen above, the critical illness benefit rider is an add-on rider that you can opt to include over and above your base term insurance policy at a nominal extra cost.

This rider can enhance the coverage of your term insurance policy by providing you with an additional sum assured amount in the event where you get diagnosed with any one of the critical illnesses or diseases specified in the rider document. The additional rider sum assured amount that you receive could be used to cover your treatment costs for the disease.

For instance, let us assume that you opt for a term insurance plan with a death benefit of Rs. 50 lakhs for a period of 20 years. The premium that you are required to pay is around Rs. 3,000 per year.

Now, at the time of purchasing the policy, let’s assume that you also opt for the critical illness rider for the same tenure of 20 years. The rider premium is set at Rs. 1,000 per year. The rider sum assured that you would receive upon diagnosis of any one of the diseases mentioned in the rider document is set at Rs. 15 lakhs.

In the event where you first are diagnosed with a disease mentioned in the policy document, the insurer would be obligated to pay your Rs. 15 lakhs as a lump sum amount. You can then use this amount towards your hospitalization and treatment expenses. In the event where you face an untimely demise due to this disease, the insurer would pay the death benefit of Rs. 50 lakhs as per the base policy to your nominees or beneficiaries.

 

Conclusion

 

Both term insurance and health insurance are two very essential insurance products that you, as an individual, should consider investing in. This way, you can get coverage and financial protection from the situations that life throws your way.

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Disclaimers:
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~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information. 

X
Disclaimer

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any call made, SMS or WhatsApp sent in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

 

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Disclaimer

%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium amount is total of all the premiums received, exclusive of extra premium, rider premium and GST & /any other applicable tax levied, subject to changes in tax laws
Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

X
Disclaimer

Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V04)

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116


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Life Cover + 16% Discount** +Save Tax*!
Under Section 80C & 10(10D) of Income Tax Act, 1961*
Get Life Cover + Save tax up to Rs 46,800*
₹2 Cr Term Plan
@ 21/Day²
Free Health Management Services
upto ₹ 31,000 p.a.^^

Disclaimer:

2Above illustration is for Bajaj Allianz Life eTouch II- A Non-Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N198V01) considering Male aged 23 years | Non-Smoker Preferred | Annual Income =>Rs. 15,00,000 per annum | Indian Resident | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 2,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 7,159. 2nd Year onwards premium is Rs. 7,760. Total Premium is Rs. 2,32,199 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly instalments (Lumpsum Payout Percentage : 40, Income Payout Percentage : 60). Income payout instalment opted for 40 years | Premium shown above is inclusive of Online Discount only, no other discounts have been considered and exclusive of Goods & Service Tax/ any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.

**5% Discount applicable for customer's first individual life insurance policy, applicable only on first year’s premium. 5% Discount for salaried customers, applicable only on first year’s premium. 6% Discount on online purchase is available for regular premium payment and limited premium payment frequency, applicable only on first year’s premium.

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy. Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

^^Get Free Health Management Services upto Rs. 31,000 per year

Health Management Services Frequency Cost (₹)
Doctor Insta-Consultations 3 consultations per month = 36 consultations per year Average cost per session = ₹500
Total cost per year = ₹500 * 36 = ₹18,000
Health Coach
(Diet & nutrition consultations)
1 consultation per month =
12 consultations per year
Average cost per session = ₹500
Total cost per year = ₹500 * 12 = ₹6,000
Emotional Wellness
(Psychologists consultations)
1 consultation per month =
12 consultations per year
Average cost per session = ₹500
Total cost per year = ₹500 * 12 = ₹6,000
Network discounts: Throughout the year Assumption – Total expense on these services throughout the year
Medicines (M) = ₹5,000
Lab-test booking (L) = ₹5,000
Total discounts that can be availed:
M - 10% = ₹500
L - 10% = ₹500
Total per year as per assumption ₹31,000

Note: The above mentioned costs are based on estimated average market price for respective services. T&C apply.

Doctor Insta-Consultations and Health Coach Services are unlimited and the above numbers are assumed only for the purpose of calculation of the yearly benefit.

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

 

BJAZ-OT-EC-10260/24

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