Understanding the Difference Between Life and Health Insurance

15-June-2021 |

Insurance can be a tricky subject to master, and it gets trickier when we consider important policies that govern our future. As we grow older, our responsibilities also increase, and securing the interests of our loved ones becomes of paramount importance. Financial planning requires us to consider future contingencies. Whether it is a life insurance policy or a health insurance policy, they are designed to help us meet our future financial needs. However, one should note that no two insurance products are alike. If you look at life insurance plans in India, you will find significant differences between products and types like savings plans, guaranteed# income plans, etc.


In this article, let us discuss the major difference between a life insurance plan and a health insurance policy. After all, these two happen to be the most popular insurance products in India.



What is life insurance?

Life insurance is a security cover for your family in the unfortunate event of your demise. While we have no control over life events, a life insurance plan in India will safeguard your family’s financial interests in your absence. Individuals insured by a life insurance policy receive a pre-decided lump sum in the event of the policyholder’s sudden demise.


Why should I opt for life insurance?

Life insurance plans in India, such as the Tata AIA plans, offer certain benefits to the insured. 


  • It eases the financial burden resulting from losing the family’s sole provider. Such financial assistance helps the family stay afloat or start over.

  • Life insurance offers a pension plan or retirement saving plan, especially for senior citizens. A retirement saving plan offers the privilege of a pension plan to take care of expenses that arise post-retirement. This comes in handy for those looking to secure their future after retirement by increasing their savings. You could opt for a life insurance policy with a money-saving plan.

  • It opens up several investment opportunities through maturity benefits. Life insurance plans in India combine the benefits of a long-term investment while also providing reliable returns regularly in guaranteed# income plans. Also, Unit Linked Insurance Plans (ULIPs) allow for the premium to be invested in the share market, opening up market-linked returns on premiums. This feature turns these policies into another investment form, with the added benefit of a life cover.

  • These plans enable tax* saving for premiums of up to ₹ 1.5 lakh under Section 80C of the Income Tax Act, 1961. Irrespective of whether the insured party is a salaried individual or self-employed, a savings plan can be used to save taxes*.


What is health insurance?

A health insurance policy offers coverage that protects you and your family from large hospital bills and healthcare expenses. During financial planning, it is important to note the health risks of those being insured. While it is difficult to predict the health risks, existing medical history and frequent health checkups can help assess risks, enabling you to make an informed decision.


Why should I opt for health insurance?

Health insurance policies secure you and your family from unplanned medical expenses that often lead to hospital visits and stays. Getting a health insurance policy protects from huge expenses, such as ambulance fees, hospital bills, surgery costs, medicines, etc. Health insurance plans can help in the following ways:


  • Security against medical emergencies: It is important to note that medical emergencies can happen to anyone. They have become pretty common in recent times. In today’s times, even a visit to the hospital for a medical checkup can leave a big hole in your savings. An exhaustive health insurance policy allows you to protect your savings and not carry the burden alone, making health insurance a great money-saving plan.

  • Protects against inflation in healthcare: Even with rising medical costs and expenses, you could opt for high-quality healthcare where you do not need to bear the expenses by yourself.

  • Full coverage: Health insurance policies in India cover the entire process starting from the doctor’s consultation and prescribed tests to room rent, ambulance, and miscellaneous expenses. Some policies also cover Ayurvedic treatments. This provides enough coverage for all medical requirements in high-quality care. Also, with a manageable increase in your premium, perhaps the best of world-class healthcare facilities open up for you. You may be able to afford facilities like an air ambulance, foreign treatment, etc., which might have been out of reach without an insurance scheme’s protection.


However, please do not confuse a health insurance policy with a guaranteed# income plan. If you do not make a claim on your health insurance plan, you do not get your purchase price or premium back, nor do you get any returns.

With life insurance plans in India, you could still be looking at growing your wealth. Some life insurance products also offer you accident and health cover. However, they shouldn’t be confused with health insurance as their healthcare provisions are restricted.

There is no “one fits all”, when it comes to insurance matters. You would find that each insurance product has its own utility, and for different people, different products may suit.

As our needs tend to change based on the stage of life we find ourselves in, it is recommended to buy policies considering the present as well as the future. At younger ages, running into lengthy hospital bills might be rare, but that might change as we grow older or have aging parents. Purchasing a health insurance policy when you are younger means that the premium you pay will also be low. It is always good to have health insurance as medical costs increase every year. A good health insurance policy helps you keep up with such expenses. Insurers also offer a top-up through which you can increase your coverage.

Life insurance plans in India are ideal because they provide your family with the much-needed financial relief in an eventuality. Pure term plans secure the future of your loved ones in your absence. Moreover, endowment plans would also let you make use of the sum assured upon maturity. Guaranteed# income plans help you park funds for expenses, such as your children’s education in the future. Retirement saving plans help ensure your financial security post-retirement when your regular income ceases.

It is a good idea to opt for retirement saving plans because it is important to calculate the funds we would need at the end of our careers. The amount we invest in retirement saving plans can determine how financially secure we are post-retirement.

Tax* saving is one such area where savings plans and guaranteed# income plans come into play. 



Unfortunate life events don’t come knocking, but the best way to deal with them is to be prepared financially. Safeguarding the interests of your family to ensure that all medical emergencies can be dealt with properly is of great importance. This should be your number one priority when choosing a money-saving or guaranteed# income plan.

It is important to have an exhaustive health insurance policy that can cover medical bills when they begin to pile up. Also, it is always recommended to compare insurance policies online and then invest in one that fits all your needs. Making an informed decision will help take you further on your financially secure future.




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  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you

  • #Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry



  • Past performance is not indicative of future performance.

  • All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.

  • Please make your own independent decision after consulting your financial or other professional advisor

  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan and it will be subject to Company’s underwriting and acceptance.

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  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

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