Comparing Life vs. Health Insurance

In this article...
  • Compare live vs. health insurance to learn their features and benefits. Get the facts you need to make an informed decision about your insurance coverage.

Insurance lowers the risk of you or your family suffering financial hardship in the future. Laws and rules may require you to purchase some types of insurance. For example, you usually need automobile insurance to drive a car, and if you have a mortgage, you typically need homeowner's coverage. Life and health insurance generally aren't required, yet Americans spend billions on them every year. By comparing life vs. health insurance, you can decide if you'd benefit from one or both types of protection.

Life Insurance vs. Health Insurance

Life insurance and health insurance both require you to make monthly premium payments in exchange for financial protection, but their purposes are different.

Life Insurance

Life insurance pays money to people who you name if you die. The recipients of the insurance or beneficiaries can use the money to:

  • Pay for your funeral and burial or cremation
  • Settle your medical expenses
  • Pay off your debts
  • Replace your income
  • Cover major expenses like college education

Whole life is one type of life insurance that builds up a cash value as you make payments.

 You can use the cash value to:

  • Secure a low-interest loan
  • Pay for premium payments
  • Cover emergency expenses
  • Supplement your income
  • Fund long-term care

Health Insurance

Health insurance makes medical care more affordable. It provides coverage for:

  • Preventative tests 
  • Office visits
  • Hospitalization
  • Medications
  • Diagnostic tests
  • Medical procedures

Most health insurance plans cover only a portion of medical expenses, leaving you responsible for the remainder. You may need to pay your share when you receive the medical care, or you might receive a bill afterward.

Is It Normal for Life Insurance to Request Medical Records?

Life insurance provides a payout if you die, not for medical expenses. Knowing this, you may be surprised if a life insurance company asks for your medical records after you complete an application. However, obtaining medical records is a common step for life insurance underwriting. 

To determine whether to approve your application and decide how much to charge you for premiums, life insurers assess the likelihood that you'll pass away soon. In addition to medical records, underwriters may ask you to undergo a physical exam or to complete a medical questionnaire. They may also examine public records, credit reporting information and even your public social media posts during underwriting.

If you have a health condition or are at risk of developing one, the insurance company may deny your application or set your premium payments at a higher level. Smoking, regular consumption of alcohol, using recreational drugs and risky recreational activities can also impact the outcome of your application.

Is Life Insurance and Mediclaim the Same?

No, life insurance provides a payout if you die while your policy is in effect. Mediclaim is a form of health insurance that only covers expenses related to medical emergencies, such as hospitalization. A Mediclaim plan will only pay if you require sudden surgery, suffer an accident or develop a critical illness like cancer. Other health insurance plans offer payment for a wide range of medical expenses beyond hospitalization. Mediclaim is generally not available in the United States.

Insurance Coverage Needs Change Throughout Life

Health and life insurance don't take the place of one another. Many people need both types of protection. Your specific insurance needs depend upon many factors, including your age.

Young Adults

People in their 20s and 30s often believe they don't need health or life insurance because they are less likely to develop a serious illness or die suddenly. The truth is that both types of coverage can be beneficial, and premiums for young adults are usually low.

The Affordable Care Act (ACA) allows young adults to remain on their parent's health insurance until the age of 26. Some states extend the timeframe to age 30 or 31. For young adults who can no longer remain on their parent's insurance, a catastrophic plan that provides coverage for major medical expenses may be adequate. Individuals with health problems may want to buy a health insurance plan through their state's health care exchange.

Those whose income falls between 100% and 400% of the federal poverty level may qualify for tax credits to make premium payments more affordable.

As a young adult, you may need life insurance if you:

  • Have a large amount of debt other than student loans, which are discharged after death
  • Provide financial support for family members
  • Believe your family wouldn't be able to cover the cost of your funeral
  • Are concerned you may develop a health condition in the future

Obtaining whole life insurance when you're young that lasts until you die can lock in a low premium rate and guarantee that you'll have coverage later even if you develop a serious chronic condition.

Married Couples and Parents

Your life insurance needs change when you get married and have children. Medical expenses can quickly add up and create financial hardships for families, making health insurance important. You may be able to obtain coverage for you, your spouse and your children through your employer. Otherwise, you can obtain coverage through your state's health care exchange. 

Life insurance helps ensure your spouse and children can maintain their standard of living in the event of your death. To determine how much life insurance you need, add up:

  • The amount of money you'd make for the number of years you would want to replace your income
  • The total amount of debt that you owe
  • The cost of a college education for each of your children

Subtract any savings and use that figure as a guide when shopping for life insurance.

Older Adults

Once your children become financially independent, your insurance needs change again. If you're 65 or over, you can get health coverage through Medicare. You can choose from Original Medicare or Medicare Part C through a private insurer. Prescription drug coverage is available through Medicare Part D plans that you purchase separately through health insurance companies. 

You may be able to decrease your life insurance coverage as your children move out and you pay off your mortgage. If you have term insurance, you may want to convert it to a whole life policy before it expires. You can often do so without having to undergo a medical exam, and the coverage will stay in place until you die.

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