In 2020, 54% of Americans owned life insurance while 91.5% of Americans owned a health insurance plan. Despite the large gap in ownership percentages, unfortunately both terms; health and life insurance, are often used interchangeably. This is a grave error that people make; one that can have direct impacts on their financial planning and ultimately, their health.
It is important to know the difference between the two, especially in the economic climate left behind by the coronavirus pandemic. In this article, you will learn more about the differences between the two and which one is more important.
Life Insurance vs. Health Insurance – The General Difference
Insurance as a whole is a very important sector, helping people mitigate damages and effectively reduce the inconvenience of unexpected events. However, every type of insurance – no matter how similar they might seem – is different from the other.
Life insurance is a type of insurance that pays a death benefit to your appointed beneficiary(s) in case of your death. The purpose is to leave behind some sort of financial support to replace the loss of your future income and to help them in their time of need.
You can think of life insurance as a sort of premature legacy plan where you leave money for your spouse and/or children so that they don’t struggle.
Health insurance, also known as medical insurance, is a type of insurance that helps pay your medical expenses. In the US, health insurance used to be mandatory until 31st December, 2018. Since 1st January, 2019, the only type of insurance that is still compulsory is automotive insurance.
The goal of this insurance is to pay for doctor’s visits, medications, tests, procedures, and more, as and when the need arises. Unfortunately, the cost of Medicare in the US without insurance is extremely high – to a point where people can go bankrupt over something as simple as a panic attack!
Here is a table to highlight even more differences.
|Type||Life Insurance||Health Insurance|
|Purpose||Helping beneficiaries after you pass away||Covering the cost of medical treatment for yourself and other beneficiaries|
|Types||Term, whole and investment-linked policy||Different tiers of coverage|
|Payout Terms||Lump sum upon death of policy holder||Once policy terms are fulfilled[KH1]|
What Type of Insurance Do I Need?
If you think about it, both insurance policies are important in their own way. Where one helps you take care of your family in case of an uncertain event, while the other continues to help you and your family through sickness.
However, if you really must pick one of the two – and we don’t recommend opting out of either of the two – you should go for health insurance. As mentioned above, Medicare costs without insurance are enough to break your bank in just one day. Your savings can help your family after your death if it comes down to it.
Having said that, we recommend that you don’t opt out of either one, but only limit coverage to the service you really need. The more limits you implement, the most affordable insurance costs become.
If you’d like help determining which insurance policy fits you best or how you can reduce costs of health and life insurance, we recommend you get in touch with us at LegacyArmour. We have a team of experts that can help determine the best action for you in regards to any type of insurance policy, as well as making a will, storing sensitive information, and more!