There is a different purpose for each type of insurance. The intention of the insurance plan is to safeguard and provide safety to the insured. The family members are safe against the uncertainties of life. It is very important to build a risk managed portfolio. A very well-versed risk-managed portfolio will consist of different types of insurance products which keep safety and also protect the insured against the uncertainties of life.
When it is time to select the right kind of insurance many investors get confused because of the options available in the market. The insurance choice and the selection of the products should be dependent on a few of the important factors such as time of insurance, individual goal, sum assured, affordability, and flexibility involved in the plans. Here in this article, we will throw some light on the differences and utility of the life insurance policy and health insurance policy.
What is a Life Insurance Policy?
During the period of economic productive life, every individual will try to build a corpus of funds for their dependents so that during times of financial need they will not look around for someone to come and help. A life insurance policy is considered a safe tool for providing a complete financial protection for dependants and family members.
A life insurance plan is an agreement between the insurer and the insurance provider that ensures the death benefit to the dependants in case of the sudden demise of the policyholder. The return benefit for the dependants will be financial. The policyholder will create this financial security by paying premium amounts on the policy. Life insurance policy will provide financial security for the family and it will be a savings and insurance plan.
Different types of Life Insurance policies
There are different types of life insurance policies and these can be classified into three different categories.
- Whole life Insurance
- Universal life Insurance
- Term life Insurance plan
1. Whole life Insurance
The whole life insurance plan is typically a fixed premium paying plan with a sum assured to the nominee. The insurance plan cost is very much less than the Universal life insurance plan and much higher than the term life insurance plan. There is a lot of consistency and no risk for the customer. Most of the time whole life insurance policies will allow insured parties to choose a loan which is an added advantage under this life insurance plan.
2. Universal life Insurance
Universal Life Insurance policy is similar and the structure works as same as the whole life insurance plan. The nominee of the Universal life insurance policy will be entitled to get the death benefit in case of the demise of the policy holder.
The cost is main difference between the universal life insurance plan and the whole life insurance plan. The universal life insurance plans are more expensive than the whole life insurance plan. The investment nature of these plans will add a degree of risk which is the main reason for the flexible plans.
3. Term Life Insurance
Term life insurance plan is the most simple and most popular type of insurance. This policy is very much affordable, much flexible, simple among all the insurance products in the UAE. It will cover the life insurance for a given period of time and that is why it is called a term life plan.
The applicants have the option to choose the sum assured and the term plan based on their requirement and affordability. Term life insurance is a risk managed tool and there is not much maturity benefit associated with them.
What is a Health Insurance policy?
The health insurance policy plan is a different kind of life insurance policy. The main objective of this plan is getting a health insurance plan which is to ensure that financial assistance is provided amid medical emergencies. It is defined as an agreement which is between the insured and the insurer which will provide coverage for all medical assistance. In return for the assurance, the policyholder will pay a certain amount in the form of a premium which is similar to life insurance. The policyholder will get the facility of cashless treatment or expenses reimbursement option for the medical treatment.
Different types of health insurance plans
There are different types of health insurance plans and these are described below.
- Personal health insurance
- Family health insurance
- Senior Citizen Health Insurance
1. Personal health insurance
Personal health insurance is also known as Individual health insurance plan. This type of insurance is designed to cover individuals and only a single person. This plan will provide cover against different types of critical illness, hospital expenses, medical complications which will arise during the lifetime of an individual.
2. Family Health Insurance
This is designed for the family medical needs and it provides coverage on vital aspects of illness, medical emergency, hospital expenses, illness, accidental coverage and any other medical coverage that family members may come across during their lifetime.
3. Senior Citizen Health Insurance
This health insurance is specially designed for senior citizens or the people who are above the age of sixty. The senior citizens health insurance plan is designed and developed for the senior citizens which will take care of all the medical requirements.
It provides medical check ups and quality medical services for the senior citizens. The age limit is 60 years and above but however, this may differ from servicer to servicer. It is advised to consult the service provider before purchasing the policy.
Take away
It is noticed that there has always been a dilemma in selecting which is best suited for either the life insurance policy or the health insurance. It is important to note that both the insurance will serve different purposes. Since these policies both are different and have their own significance making the right choice between them is very important. There is no universally accepted rule to purchase both policies as it all depends on the individual’s requirement. Make the right choice according to your requirements and purchase the best insurance plan.
About the author
Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It's a commercial mortgage banking company. He has a "Doctoral Degree in Commerce" and two master's degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.
