Insurance is an arrangement in which the insurer (the insurance company) agrees to reimburse the insured (the individual) in the event of financial loss or damages. It’s a form of risk management where some companies promise to cover your loss if you meet certain monetary and security conditions.
Insurance comes in different forms, but the most common are life insurance and health insurance. The two forms of insurance are so contrasting yet so similar that most policyholders often conflate the policies. This article looks into these two types of insurance, comparing their features and contrasting their benefits.
Life and Health Insurance: What Do They Mean?
Life insurance is an agreement between the insurance company and policyholder that clearly states the payment of a sum of money after the death of the insured. On the other hand, health insurance covers the uncertainties surrounding the healthcare and medical costs of the insured.
There are two main types of life insurance: Whole Life Insurance and Universal Insurance. Whole Life Insurance provides exclusive benefits to the insured at fixed rates. Universal insurance provides the insured with standard benefits at flexible rates.
Likewise, health insurance can be private or public. Private health insurance relies on private insurance companies for premiums and claims, often at the insured’s choice. Public health insurance is the coverage of public health risks, usually mandated by the government. You can compare health insurance rates from Assurance to better understand the difference.
Similarities Between Life and Health Insurance
There are several similarities between life and health insurance. For instance, before an insurance company allows anyone to get a policy quote, there’s an assessment of the individual’s medical history. Some other similarities include:
Both insurance policies run on premiums. Premium is the amount you agree to pay an insurance company to be mitigated against financial loss. It can be monthly or yearly. Several factors are considered in a premium.
If there are premiums, there would be claims. Both policies provide claims. Claims are simply returns on your premiums. In other words, your premium serves as a liability until they turn an investment return through claims.
- Risk Management
Life insurance is about life-threatening risks, and health insurance is about health-related risks. No doubt, both insurance policies are geared at managing life risks for you.
Differences Between Life and Health Insurance
As much as there are similarities, there are also differences. By nature, life insurance generally works after the insured’s death, while health insurance reimburses the insured for medical costs. Other differences between them include:
- Main Categories
There are two categories of life insurance. You will be operating a universal life insurance contract if you are not operating a whole life insurance contract. Medical insurance, on the other hand, is divided into private and public health insurance.
- Core Benefits
Life insurance benefit is claimed post-existence, which means claims mature after death. A sum of benefits decided by the policy and premiums is paid as a death benefit to the insured’s nominee. Medical insurance mitigates the treatment cost for illnesses and other medical conditions. The type of policy and premiums decides these costs.
- Policy Purpose
Both policies are unique to their purpose. Although life insurance will keep your family and the legacy about you running during your absence, medical insurance will reimburse you for expenses or other financial loss due to illnesses and other medical conditions to prevent death.
Which Policy is More Preferable?
Both types of Insurances serve different purposes, and they are equally important to manage your risk. It would be best if you go for life insurance if you’re afraid of your inheritance, debt, and your family’s financial security. Aside from that, life insurance also works as a supplement for your retirement savings.
In the same vein, medical insurance should be the go-to policy for everyone for health and safety. It’s best for policyholders who want the best medical care at no strain on their finances. The benefits of medical insurance extend to health education and free medical checkups.
Choosing life insurance over medical insurance is ignorant at most if your preference does not align with the policy—the same with going for medical insurance instead of life insurance. In the end, what matters is your preference and how each insurance policy aligns with your purpose.