Understanding The Difference Between Term Insurance And Medical Insurance.

Medical insurance is the contract between the insured and the insurance company to provide the financial compensation in case a specified disease happens to the insured. The amount of financial compensation is governed by the terms and scope of your medical insurance policy. The purpose of medical insurance is to keep your finances secured against unforeseen and large medical expenses. Usually, the compensation is limited to the actual expenses incurred or the sum insured, whichever is less.

The term insurance is the contract between the insured and the insurance company to pay the financial compensation to the nominee of the insured in case of demise of the insured. The purpose of the term insurance is to provide financial support to the family of the insured in case of unfortunate death of the insured. The amount of compensation is not linked to any expense, but it is decided at the time of availing the policy.

Term Insurance Vs Medical insurance

For a smooth financial life of yourself and your family, both kinds of insurance - term insurance and medical insurance are required. Below are the major differences between the two:

1. Objective

The purpose of the term insurance is to provide financial support to your family after your death. There is no benefit during your lifespan. On the other hand, the purpose of medical insurance is to provide financial support to yourself in case of a medical emergency with huge expenses.

2. Premium Amount

The premium amount of the term insurance is minimal and affordable to the most. However, the premium for medical insurance is costly, particularly after a certain age. It is advisable to avail medical insurance when you are healthy and young.

3. Renewal Benefit

The term insurance does not come with renewal benefits. Under standard term insurance, you usually pay the same amount every year. On the other hand, if there is no claim under your medical insurance policy, you can avail No-Claim Bonus(NCB) in your next renewal.

4. Tax Benefit

The premium of term insurance is deductible from the income under section 80C of the income tax act, subject to the limit of Rs. 150000. The medical insurance premium is deductible under section 80D of the income tax act.

Conclusion

Both term insurance and medical insurance have their distinct set of benefits while being two of the most crucial types of insurance plans. This is why it’s imperative that you include both in your financial portfolio. While term insurance offers financial aid to your nominated beneficiaries in case something unfortunate were to happen to you, medical insurance, on the other hand, is designed to cover any medical costs you might have to incur in the case of hospitalization and/or critical illnesses.

Also read - Exploring Public Provident Fund Scheme And Its Benefits

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.