Articles 2107 views September 17, 2019

Difference Between Life Insurance and Health Insurance

Those new to the concept of insurance or its nuances often inquire about the difference between life insurance and health insurance. While the basic concept underlying both the kinds of insurances lies in covering the insured against any sudden or unfortunate event in the future, the manner in which they protect and preserve are entirely different. Similar in concept, but contrasting in functionality, life insurance plans serve to secure life cover for the insured, and thus, ensure a secure future for their nominees while health insurance is bought to offset the expenses pursuant to medical treatment in the future.

Health Insurance

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The following table will help understand the key points of difference between life insurance plans and health insurance policies.

Points of DifferenceLife Insurance Health Insurance
BenefitsMaturity Benefit, Death Benefit, Reduced Paid-Up Benefit, and Surrender Benefit.Pre-Hospitalization, Post-Hospitalization, Hospitalization, Day Care Treatment, etc.
CoversIndividual and whole FamilyIndividual, family (spouse, children, and parents), and Group.
Types of Plans Term Plans, Traditional Savings Plans, Child-related Plans, Retirement Plans, etc.
Individual, Family floater, Group, Critical Illness, Accident, etc.

Tax Benefits
Available under Section 80C and 10(10D) of the Income Tax Act 1961.Available under Section 80C of the Income Tax Act 1961.
Policy Term5-30 years5-10 years (can be renewed life long)
Free Look Period15 days (30 days if the policy is obtained from distance marketing) 15 days (if the policy term is at least 3 years)
Waiting Period90 days1-4 years for pre-existing diseases at the time of policy inception
Policy Cancellation Within free look period or after free look period Within free look period or after free look period
Exclusion If Life Assured Commits SuicideThe Health Insurance policy document mentions a list of exclusions.
Personal Accident & Disablement CoverAvailableAvailable
Premium Payment OptionAnnual, Semi-annual, Quarterly, or Monthly
Monthly, Quarterly, Half-yearly in addition to an annual payment mode
Entry Age20-60 years5-80 years

Let’s Explain the Benefits

We buy insurance to get benefits whether it is life insurance or health insurance. The difference is just what you are looking for. Do you need financial protection from health risks? Buy a health insurance policy as it protects you financially from hospitalization expenses that include room rent, medicines, surgeries, treatment, doctor fees, etc. Are you looking for a plan with a life cover and guaranteed returns? Buy a traditional life insurance plan with which you could get a lump sum amount at maturity. The nominee will get a death benefit if you die during the policy term. And you can also surrender life insurance if you need urgent funds.


To whom you want to provide protection – Is it for yourself, your spouse or your family? In both Life and Health Insurance, some plans are specific for individuals, families, or a group of people.

Types of Plans

Both Life and Health Insurance have a wide range of products from which you can choose as per your requirements. There are Health Insurance plans like Individual, Family Floater, Group, Critical Illness, Accident, etc. Same in Life Insurance, there are plans such as Term, Traditional, Savings, Regular Income, Retirement, etc.

Tax Benefits

As per the prevailing income tax laws, the insured can avail of Tax Benefits in his/her Life and Health Insurance. Under Section 80C & 10(10D) of the Income Tax Act 1961, you can get tax benefits on your Life insurance premium payments. Under Section 80C, the premium payment makes you eligible for a maximum deduction of INR.1,50,000 if the amount of premium payment is 20% of the sum assured in a financial year. Under Section 10(10D), you can avail of tax deductions on claims which are for death and maturity benefit. Tax deductions are also available for accrued bonuses of life insurance policies. There is no upper limit for claiming under Section 10(10D).

On the other hand, if you have Health Insurance, you can claim a deduction Under Section 80D of the Income Tax Act 1961 for your premium payments. You can claim a maximum amount of INR 50,000 in a financial year for the incurred expenses.

Note – Tax Benefits are subject to change from time to time


A Life Insurance plan ranges from 5 to 30 years, which could vary based on your insurer. Health Insurance covers an individual or group of an individual for 5 to 10 years. And Health Insurance cover can be renewed by the policyholder. The policy term is not confined to 5-10 years, It may vary depending on your insurer.

Free Look Period

If you buy Life Insurance, you will have 15 days to review the terms & conditions of the policy starting from the date of policy receipt. It can be extended to 30 days if insurance is sourced through Distance Marketing Mode. In Health Insurance, you will have the same 15 days free look period, but it is provided only if your policy term is of at least 3 years. No free look period applies to renewals.

Distance Marketing Modes

If you get your Life Insurance from the following sources, the free look period will be of 30 days:

  1. Short Messaging Service (SMS)
  2. E-mail
  3. Internet
  4. interactive Television (DTH)
  5. Direct postal mail
  6. Newspaper & magazines
  7. Solicitation via any means of communication except in person

Waiting Period

The 90-day waiting period applies to Life Insurance. And if the insured person dies during this period, the nominee will not get any death benefit. But they can seek a refund of the paid premiums excluding GST and cess. On Health Insurance, the following waiting period is applicable:

  1. Initial waiting period – 30-90 days
  2. Specific diseases’ waiting period: 1-2 years
  3. Pre-existing diseases’ waiting period: 1-4 years
  4. Maternity cover waiting period: 2-4 years


You can cancel a life insurance policy within the free look period and seek a refund. Otherwise, if you cancel the policy during the term, your refund amount will come with some deductions such as proportionate risk premium, stamp duty charges, etc. An insured can cancel his/her Health Insurance during the free look period (if the policy term is for a minimum of 3 years) or after the free look period, provided the insured hasn’t made a claim. If the insured cancels his/her Health insurance policy during the free look period, he/she will get a full refund of the paid premium. On the contrary, if you cancel the Health Insurance post the free look period, you will get a partial refund of the paid premiums.


On your Life Insurance, a Suicide Exclusion applies where if the insured dies due to suicide within 12 months from the date of policy commencement or revival, the nominee will get 80% of the total paid premium, provided the policy is in force and all due have been paid. Whereas for health insurance, some pre-existing diseases and some standard exclusions will apply such as cost of spectacles, contact lenses, hearing aids, dental treatment/surgery ( unless need hospitalization), convalescence, general debility, congenital external defects, venereal disease, intentional self-injury, use of intoxicating drugs or alcohol, AIDS, diagnosis fee, x-ray,  laboratory tests which are not for the covered disease or injury, treatment of pregnancy or childbirth including cesarean, Naturopathy treatment.

Personal Accident & Disablement Cover

You can customize your Life and Health Insurance by adding a Personal Accident & Disablement rider or Personal Accident & Disablement cover. For such additional covers, you need to pay additional premiums as well. With this optional coverage, you will get financial protection in case the insured dies in an accident or suffers from a disability (caused due to accident).

Premium Payment Option

The policyholder can pay his/her Life and Health Insurance premium either monthly, quarterly, half-yearly, or yearly as per the preference


You will get a bonus on your sum insured if you haven’t claimed it in the previous year. This is known as the NCB which is provided in Health Insurance. And it will continue unless you make a claim.

For Life Insurance, the Life Assured can get different types of bonuses such as a Reversionary Bonus that is declared at the end of every policy year and will be payable on maturity and death. There are two types of Reversionary Bonus: Simple Reversionary and Compound Reversionary.

If between the 2 successive bonus declarations, the Life Assured dies or the policy matures, an Interim Bonus is payable. It is calculated as per your last bonus declaration date to the remaining period for the next bonus declaration date.

Terminal Bonus will be added to your Life Insurance if it attains maturity without surrender or Reduced Paid-Up status. And a Cash Bonus is payable to the Life Assured at the end of the policy year even if the policy doesn’t attain maturity. The cash bonus is provided yearly.

Entry Age

There is an age limitation in both Health and Life Insurance policies. If you are buying a Life Insurance plan, your age should be between 20-60 years. On the other hand, the entry age for Health Insurance starts from 5 years and ends at 80 years.

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