Published by Joe Davine on
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The differences between life insurance and health insurance

Before taking out a health insurance policy, it's a good idea to learn how this type of cover differs from life insurance. These policies are often confused, but are actually designed to offer completely different situations and each have their benefits and drawbacks.

When looking at life insurance vs health insurance, you may find that one suits your needs more than the other, or that taking out both at the same time would give you the peace of mind and financial security you’re looking for. It’s always a good idea to get all the information before taking out an insurance policy, so let’s get started.

What does life insurance cover?

Life insurance is a type of cover that pays out a lump sum when the insured person passes away. Usually life insurance is taken out for a specific length of time (known as a ‘term’), after which the policy stops being active. The cause of death commonly doesn’t matter, although there are always some exclusions on each policy for issues such as death from pre-existing conditions and suicide.

This is the type of cover that is typically taken to ensure that debts are paid off and family members are well looked after. If you take out a mortgage then you will probably be advised to take out a life insurance policy to cover the cost of the loan in case the worst should happen.

What does health insurance cover?

Unlike life insurance, health insurance pays for the costs incurred if you get ill or have an accident that requires medical treatment. Also known as private medical insurance (PMI), health insurance doesn’t pay out a lump sum to your family upon your death, but rather covers the means to help you get better by giving you access to speedy, high-quality medical care.

Health insurance gives you the option of avoiding long waiting lists on the NHS, especially in non-emergency situations. Medical insurance will cover the costs of medicine, private hospital fees, and other expenses that can be incurred when having to get treatment. The exact illnesses and amount you will be covered for will depend on your policy.

Like life insurance, health insurance is paid for through regular monthly premiums. However, unlike life insurance policies, private medical insurance will have an excess included in the policy (the amount you have to pay before your insurance will cover the costs). The higher the excess is set at, the lower your monthly premiums are likely to be.

Life insurance vs health insurance: a quick summary

Life insurance

  • Cash lump sum payment upon your death.
  • Usually has a set term length.
  • Useful for offsetting debts of the financial impact your death could have on your family.
  • Won’t pay out while you’re still alive.

Health insurance

  • Covers private medical costs if you get ill or have an accident.
  • Has no payout in the event of your death.
  • Includes an excess which you will have to pay before receiving any money from the policy.
  • Helps avoid long wait times for non-emergency medical care.

What makes health insurance different from critical illness insurance?

Critical illness cover is a form of life insurance that is designed to pay out a lump sum in the event of a serious accident or an illness that prevents you from working. The conditions for which a critical illness insurance policy pays out will be fully listed in the contract, and it is common for critical illness cover to be offered as an extra when purchasing life insurance (although it will increase your premiums significantly).

The difference between this and health insurance is that health insurance pays for your medical care directly, rather than giving you a cash sum up front which you have the choice over how to spend. Often people take out critical illness cover to protect against the effect of losing income by not being able to work, rather than to pay private medical bills.

Life insurance vs health insurance: Can you have both?

Since these are insurance policies that cover different situations, there is no problem in taking out both types simultaneously. In fact, this is a smart way of protecting you are your family against more of the problems that life could throw at you. The same insurers that offer life insurance will often provide private health insurance as well, and you may be able to get a reduced rate if using the same insurer for both policies.

Clearly, you need to make sure that the combined cost of both types of cover is something that you can afford. If you can, then it makes sense to get the comprehensive cover that this combination offers. Check out some quotes and you may be pleasantly surprised at how affordable it is to get both kinds of protection.

What if you can only afford one of them?

Ok, so what if you can only afford to take out one of these policies? Which one would you be best going for? In that case, the matter of life insurance vs health insurance comes down to your own personal situation and preferences.

Are you more concerned about how your family would cope in the event of your death or how you could handle it when dealing with serious illness or injury? We all have different ways of looking at life and you will want to consider your own fears and priorities closely. It is worth noting that, as a UK resident, you will always have access to medical treatment on the NHS, although wait times are significantly longer than with private health insurance.

How can I find the best policy?

There is a lot to be said for putting your mind at ease with the right insurance policies, which is why we dedicate ourselves to helping you find them. Whichever type of policy you have chosen to go for (or if you think taking out both would be right for you), we’ll help you find the policy you need.

The best way to go about it is to decide exactly what level of cover you need. In the case of private health care, you’ll want to think about how low you’d like the premium to be and if you want any particular illnesses (such as cancer) included. For life insurance the concerns are usually about how long you’d like the term to be and how large a payout you need from a policy.

Once you have worked out what you need, use our in-depth reviews to find the best value policy that meets your requirements. We deconstruct every policy offered by all the main providers so you can make an informed choice and get the best deal.

If you want to find a policy as soon as possible, then just follow the link below and we’ll find you a quote in minutes.