Insurance can be a complicating subject for people as so many insurance terms are used to differentiate various insurance types.
For instance, according to the fact sheet compiled by Insurance Information Institute, the life or annuity insurance sector covers annuities, accident and health, and life insurance. With net premiums for 2019 accumulating to almost $680 billion, one might think it is a single type of insurance. However, in reality, it is a huge single sector undertaking many different types of insurance, including the two we will discuss today.
Life vs. Health Insurance
Where life insurance and health insurance both ensure a definite safety for the bearers, circumstances can lead to a difficult situation. For instance, life insurance would ensure that the family would be well taken care of after the untimely demise of a loved one. However, if someone’s health starts to deteriorate, then they would surely require health insurance to pay off the amounting bills that significantly reduce given they have health insurance.
But which one should you pick if only one is important and your budget is tight?
Life insurance is your personal shield for your family and loved ones in case you aren’t there to provide that. It is more of a relationship aspect than just a sufficing need because you want something to be there for your family in case of an untimely demise.
The person getting insured forms a commitment with the insurance company, and that bond works in case of an unfortunate event.
Usually, these benefits are tax-free so that the accumulated sum reaches the family members in full and without any deductions. That’s why you can think of life insurance as a future savings plan for your loved ones as it is sufficient long-term care.
Types of Life Insurance
Following are the two main types of life insurance
1. Whole Life Insurance
Whole life insurance has fixed premiums. This allows the insurance to pay out a fixed tax-free sum to the beneficiaries. It is relatively less costly than its counterpart with consistency and a low or no risk approach. However, sometimes people may even take up loans to fulfill this kind of policy.
2. Universal Life Insurance
Universal life insurance is more of an investment insurance policy that comes with an attached death benefit. A significant chunk of the payment is invested in adding cash value to the promised total amount with the flexible premiums. That’s why universal life insurance is considered on the hefty side of bills compared to whole life insurance. As the nature of investing is higher with potentially higher risks and returns, people take up universal life insurance mainly for flexible plans and benefits.
Advantages of Life Insurance
There is no denying that life insurance is greatly beneficial and has the following advantages to its name:
- It allows you a kind of control over your situation in case of unprecedented circumstances.
- It gives you peace of mind that your family and loved ones would be looked after when you’re not there.
- You receive the freedom to ascertain the premiums as per the choice of your policy.
- You get multiple options to choose from as per your requirements.
- Financial protection is a given even if you haven’t placed any savings apart from your life insurance.
Health insurance is more of a contractual policy between the insured and the insurance company. The contract bears the insured person’s health coverage charge in times of medical needs and crises.
Health insurance usually charges a fixed monthly, bi-monthly or annual premium for health cover. This allows you to bill your medical expenses at a significantly lower cost than the original amount charged.
It works in a way that either your bills are reimbursed for the amount paid, or the insurance company directly pays the medical expenses on your behalf. Either way, it is important to get your treatment from the hospital or medical professional that your insurance company recognizes.
Types of Health Insurance
Following are the commonly practiced three main types of health insurance:
1. Individual Health Insurance
As the name suggests, individual health insurance is designed for a single person to utilize. It works in a normal way a health insurance policy works by safeguarding and bearing medical costs and expenses but for a single person. However, unlike other types of health insurance policies, it typically:
- Provides Maternity Benefits
- Covers OPD costs
- Takes over Critical Illness Cover
2. Family Health Insurance
Family healthcare insurance is a dedicated policy to cover the entire family under a single premium policy package. It works like a normal health insurance policy and provides coverage for medical bills and expenses arising from illnesses, hospitalizations, and accidents, etc.
3. Senior Citizens Health Insurance
This is a unique type of health insurance policy that only works best for people over 60 years of age, i.e., senior citizens. Usually undertaken by retired older people, this policy is designed bearing in mind the physical and health-related challenges and hardships that arise in this age. Therefore, it may include additional benefits like:
- Domiciliary Care
- Organ Donations
- Critical Illness Care
Advantages of Health Insurance
Health insurance is extremely beneficial and should be undertaken by everyone on a mandated basis because,
- It covers your medical cost almost entirely.
- It significantly cuts down your medical expenses that may surge up if arising from an accident or potentially problematic disease.
- It records your medical history and ensures optimum health care is received by the insured person.
All in all, both life insurance and health insurance have their individual advantages, befits, and reasons why people should opt for both. However, suppose you are on a tight budget and have to choose one. In that case, it is important to go for health insurance as it ensures your wellbeing on a priority mitigating your risk of getting into an untimely situation in the first place.
You should always make a choice depending on your personal circumstances and requirements.
ACE Insurance Agency can help you make the right choice. To learn more about our services, contact us today.