Life comes with its share of changes and challenges, which is why securing your health and your family’s future is a wise and necessary step. But with so many types of insurance out there, confusion is common—especially when comparing term insurance and health insurance. While both offer protection, their objectives, benefits, and how they work are entirely different.
Let’s break it down so you can choose wisely—or better yet, ensure you’re covered by both.
What is Term Insurance?
Term insurance is a type of life insurance that provides financial coverage for a specified period. If the policyholder passes away during the term, a fixed sum assured is paid to the nominee. There are no maturity benefits unless you opt for a Return of Premium (ROP) variant.
The benefits of term life insurance lie in its simplicity and affordability. For a low premium, you can ensure your loved ones are financially protected even in your absence.
For example, under the Aviva Signature 3D Term Plan – Platinum, you can secure life cover up to the age of 80, choose from multiple riders like critical illness or accidental death, and opt for a reduced or flat sum assured as per your preference.
What is Health Insurance?
Health insurance is your financial cushion during medical emergencies. It covers hospitalisation costs, surgeries, treatments, pre-and post-hospitalisation expenses, and in many cases, day care procedures. It does not offer any payout upon death but saves you from dipping into your savings during a health crisis.
You can choose from various types such as:
- Individual Health Insurance
- Family Floater Plans
- Senior Citizen Policies
- Unit-Linked Health Plans (ULHPs)
Each is designed for different needs, whether you’re young, caring for a family, or a retiree needing specialised support.
Purpose: Who and What Does It Protect?
- Term Insurance: Protects your family’s future if you’re not around. It provides a lump sum that can be used for daily expenses, child’s education, or loan repayments.
- Health Insurance: Protects you from the rising costs of medical care. It ensures that your health emergency doesn’t turn into a financial one.
Premium Comparison
- Term insurance premiums are significantly lower compared to health insurance, especially when purchased early.
- Health insurance premiums might be higher and increase with age and medical history.
Buying both while you’re young and healthy not only makes financial sense but also ensures maximum coverage at minimum cost.
Tax Benefits
Suppose Ravi, a 30-year-old earning Rs. 10 lakh annually, chooses the Aviva Signature 3D Term Plan – Platinum for his life insurance needs. He pays Rs. 25,000 annually as a premium for this term insurance plan and Rs. 35,000 for his health insurance.
- Under Section 80C, the premium paid for the term plan is eligible for deduction up to Rs. 1.5 lakh per year. Ravi claims Rs. 25,000 as a deduction for his term insurance premium.
- Under Section 80D, he claims Rs. 25,000 (the capped limit for health insurance premium for self and family below 60 years) for his health insurance premium of Rs. 35,000.
By reducing his taxable income by Rs. 50,000, Ravi lowers his tax liability. Assuming he falls under the 20% tax slab:
Tax saving = 20% of Rs. 50,000 = Rs. 10,000 annually.
If he were in the 30% slab, the saving would be Rs. 15,000.
Now, if Ravi hadn’t opted for either policy, he would not only miss out on valuable tax benefits but also lack a financial cushion during health emergencies or unforeseen events. Having both term and health insurance ensures better financial stability and peace of mind for him and his family.
Flexibility and Features
Term Insurance Options:
- Standard Term Plan
- Return of Premium Plan
- Increasing/Decreasing Cover
- Convertible Plans
- Riders (Accident, Critical Illness, etc.)
Health Insurance Options:
- Cashless treatment in network hospitals
- Daily cash benefits
- Restoration benefits (for family plans)
- Pre- and post-hospitalisation coverage
While term insurance is a one-time payout to beneficiaries, health insurance provides multiple smaller claims throughout your life—each addressing a different medical need.
Which One Should You Get?
It’s not a question of one over the other—both serve distinct yet equally important purposes.
- Term insurance is for your family’s financial survival if you’re not around.
- Health insurance is for your own financial stability during medical emergencies.
Think of term insurance as your long-term responsibility and health insurance as your immediate safety net.
Why Many Still Miss Out
Many young adults, especially those early in their careers, often skip term insurance, thinking they’ll get it later. Others avoid health insurance, assuming their employer’s policy is enough. But job changes, layoffs, or company policy limits can leave you unprotected.
Being underinsured—or uninsured—is a risk not worth taking.
Financial security begins with smart choices that safeguard your future. Choosing between term insurance and health insurance is not an either-or situation. Both policies are essential pillars in building a financially secure life for you and your family.
Start with what you can afford, review your needs annually, and upgrade when possible. Because in the end, protection today is what ensures possibilities tomorrow.
