Why a person need for Term Insurance and Health Insurance
In today's unpredictable world, having adequate financial protection is crucial. Term insurance and health insurance are two fundamental pillars of a sound financial plan, each serving a distinct but equally important purpose. While they are often confused, understanding their individual benefits reveals why a person needs both to secure their financial future and that of their loved ones.
CA Kamal kishore
6/26/20252 min read
Health Insurance: A Shield Against Medical Costs
Health insurance is a contract that provides financial coverage for medical expenses. In an era of rising healthcare costs and lifestyle-related diseases, it is an indispensable tool. Here's why you need it:
Combats Medical Inflation: Healthcare costs are skyrocketing. A single hospitalization can wipe out a person's life savings. Health insurance acts as a financial shield, covering expenses such as hospitalization, surgery, doctor's fees, and medicines.
Access to Quality Healthcare: With health insurance, you can access top-tier medical facilities and receive the best possible treatment without worrying about the financial burden. Many policies offer cashless hospitalization at network hospitals, which means the insurer directly settles the bills with the hospital.
Protects Your Savings: Unexpected medical emergencies can force you to dip into your savings, which are meant for long-term goals like a child's education, a house, or retirement. Health insurance ensures your savings remain untouched.
Covers Various Expenses: Comprehensive health insurance plans cover a wide range of expenses, including pre- and post-hospitalization costs, daycare procedures, ambulance charges, and even alternative treatments like Ayurveda, Yoga, Unani, Siddha, and Homeopathy (AYUSH).
Tax Benefits: The premiums paid for a health insurance policy are eligible for tax deductions under Section 80D of the Income Tax Act, 1961, providing an additional financial benefit.
Term Insurance: A Financial Safety Net for Your Family
Term insurance is a type of life insurance that provides a financial safety net for your family in the event of your untimely demise. It is a "pure risk" cover, meaning it provides a death benefit to your nominee if you pass away during the policy term.
Here's why term insurance is essential:
Financial Security for Dependents: If you are the primary earner, your family's financial stability depends on you. In your absence, a term insurance payout can help your family meet their daily expenses, pay off outstanding loans (like a home loan or car loan), and achieve long-term financial goals such as a child's education or marriage.
High Coverage at Low Premiums: Term plans are known for their affordability. You can get a high sum assured for a very low premium, especially if you buy the policy at a young age and are in good health.
Protection of Assets: A term plan ensures that your family does not have to sell assets you've worked hard to build to pay off debts in your absence.
Preparedness for Uncertainty: Life is full of unforeseen events. A term insurance policy provides peace of mind, knowing that your family will be financially secure no matter what happens to you.
Tax Benefits: The premiums paid for a term insurance policy are tax-deductible under Section 80C, and the death benefit received by the nominee is tax-free under Section 10(10D) of the Income Tax Act, 1961.
Conclusion: A Combination of Protection
In conclusion, term insurance and health insurance serve entirely different purposes. Health insurance protects you and your finances from the high costs of medical emergencies, while term insurance protects your family's financial future in case of your death. Both are vital for comprehensive financial planning. You should not consider one as a substitute for the other. By investing in both, you can ensure that you and your loved ones are financially protected against life's two biggest uncertainties: a health crisis and the loss of the breadwinner.