Articles 393 views August 17, 2021

Insurances that cover individuals against unfortunate events are of different types. The two most popular insurances these days are health insurance and term insurance. Both these insurances cushion individuals financially against unforeseen events that might happen during the policy term.

While the growing TV and online ads have made people aware of these products, some are still not clear about the differences between the two. They tend to mix these two or err while differentiating, leading to a wrong selection of the product and a not-so-perfect insurance experience for them.

If you are one of those wanting to know the differences between health insurance and term insurance, this article is for you! Here, we will explain all these so that you can make the right call for yourself. Let’s begin!

What is Term Insurance & Why Do You Need it?

Firstly, term insurance offers financial protection to your dependents in your absence. In case you die during the policy term, the term insurance will ensure a handsome payout to your family to sustain their lifestyle in your absence. What’s more, you get the flexibility to choose from the following payout options – a lump sum, monthly income, or a combination of both.

And if you buy term insurance early on in your life, it will help you save a lot of money. The premium remains lower when buying term insurance in your 20s or early 30s compared to doing so in the later stage of your life. The reason being the chances of health complications are far less in your young days. As you age, the possibility of such complications rises, resulting in an increased premium. One unique feature about term insurance is that the premium once decided remains fixed throughout the policy term. That further calls for an early buy of term insurance.

Health Insurance & Why Should I Take It Too

Health insurance is a contract between the insurance company and the insured wherein the former takes responsibility for covering the latter in case of a medical emergency. Now, insured members can be more than one. You can have your spouse, children or your parents too as insured in a health insurance plan.

So in case you or any of your insured family members fall sick, health insurance will make sure you feel good, at least financially. It is ensured greatly through cashless treatment that you can get at any of the network hospitals of the insurer. Or if the network hospital is far away from you, you can get the treatment at some other hospital, pay the bills thereof and get all that reimbursed from the insurance company after discharge.

Let’s Check the Differences Between Health Insurance and Term Insurance

After having a brief of both health insurance and term insurance, it’s time we differentiate the two based on certain factors. Let’s check the same below.

FactorsHealth InsuranceTerm Insurance
PurposeIt ensures financial protection in case you or any of your insured family members face a medical emergency during the policy termIt ensures financial protection for your dependents should you die during the policy term
PremiumThe premium is paid annually and changes based on the year slab. The premium once decided remains fixed throughout the policy term. You can choose to pay the premium at any of the monthly, quarterly, half-yearly and yearly intervals
Coverage AmountThe coverage amount depends on the age of the policyholder, pre-existing illnesses, if any, and the number of members insured under a groupThe coverage amount depends on the age of the policyholder, health conditions, smoking habits, etc.
No Claim BonusHealth insurance offers you a no-claim bonus (NCB) if you don’t claim in a policy year. The bonus will result in raising your sum insured by 5-20% on average. The sum insured can rise up to 100%There is no such bonus available on term insurance plans
Maturity BenefitsThere are no maturity benefits available in health insurance plansMaturity benefits are available only in the case of term insurance with a return of premium variant. So if you have such a term plan and survive till the end of the policy term, the premium paid over the years will be returned to you on maturity
Rider BenefitsCritical illness and personal accident riders are available across health insurance plansTerm insurance plans can have critical illness, personal accident, premium waiver benefit riders
Restoration BenefitHealth insurance comes with the facility to restore your sum insured if the same is exhausted due to a claim/s. Some plans restore the sum insured even in case of partial exhaustion.Term insurance benefits once availed can’t be restored. Once the death claim payout is made, term insurance plans terminate.


We have differentiated the two – health insurance and term insurance – based on certain factors. But don’t look to choose from the two as both are separate and serve different purposes. So, you need to have both to be financially assured in case of any unexpected events. What you can do though is compare different term and health insurance products and choose the best one across each of the two product categories. Go for a plan offering you a high coverage amount in exchange for a reasonably priced premium.

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