iQuanti: Though they're both insurance types, health insurance and life insurance serve two separate purposes. Each of these insurances offers a unique benefit that makes it the perfect addition to your financial planning. If you're trying to decide which insurance type is necessary for your life, here is everything you need to know about the two, including the differences between them.
What Is Life Insurance?
Life insurance is a financial tool in which the policyholder pays a monthly premium for a benefit amount that is paid upon death. While life insurance can provide some benefits for the policyholder while living, the primary draw is for surviving loved ones to help cover living expenses in your absence.
Additionally, life insurance is usually paid out as a lump sum and can be used for any need without interference from the life insurance company. This type of insurance offers much more flexibility when compared to something like health insurance, where there is no specific coverage and is subject to insurance company approval.
In essence, life insurance is more often used as a fail-safe financial tool rather than something that is designed to help in day-to-day life.
What Is Health Insurance?
Health insurance is a way for individuals to pay for their medical needs. The extent to which a health insurance policy will cover depends on the insurer and plan purchased. However, it is designed to protect the policyholder, making both everyday medical expenses like a checkup and preventive care, as well as severe illness treatment, more affordable.
When it comes to deciding whether health insurance is necessary or not, it's important to keep in mind what out-of-pocket costs look like. What is thousands of dollars without insurance can be as affordable as $10 with an insurance policy for certain hospital treatments. With or without life insurance, the reality is that healthcare is expensive, and both the insured and uninsured can accrue medical-related debt.
Do You Need Both?
Life insurance and health insurance aren't interchangeable. Rather, they both offer a specific benefit for your well-being and financial health. If you're trying to decide between one option or another, keep in mind that life insurance is an optional tool, while health insurance is more of a requirement.
Though life insurance is a valuable tool, it's often one that people wait on until they're financially able to support the premium payments in addition to necessary tools like health insurance.
If you're able to, purchase both, but if only a life insurance or health insurance policy can be afforded, preference should be given to health insurance. Keep in mind that there are varying levels of life insurance, and a term life insurance policy will generally be more affordable than a whole policy with more extensive coverage.
The Bottom Line
Health and life insurance are not the same and should each be considered when it comes to building your financial plan. A quality health insurance plan can make all the difference in helping to prevent unnecessary debt, while life insurance can be a useful tool in worst-case scenarios. In order to protect yourself, it's best to have both life and health insurance in place.
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Original Source: What's the Difference Between Health Insurance and Life Insurance and Do You Need Both?
