How can you tell the difference between life and health insurance?

  • Health insurance protects you from financial problems stemming from medical costs when you become ill.
  • Life insurance primarily provides your loved ones a cash benefit upon your death.

Life insurance and health insurance: Can you tell the difference?

You may be wondering if the time is right to get a life or health insurance especially after recent global events. As the possibility of similar events happening again in the future, you may feel compelled to get insurance for you and your family.

Some may get an insurance policy on a whim without knowing the underlying principles. It’s a good thing that most insurance providers in the Philippines are regulated by the Insurance Commission (IC), and insurance underwriters are strictly required to inform clients about policies that fit their needs. With so many possible options, you still need to arm yourself with the right information to make the best choice.

Two of the most popular insurance products in the Philippines are health insurance and life insurance. Both products are paid over an agreed timeline and guarantee compensation when specific conditions are met.

To put it simply, health insurance protects you from financial problems stemming from medical costs when you become ill. Meanwhile, life insurance primarily provides your loved ones a cash lump sum upon your death.

What makes life and health insurance distinct from each other?

To put it simply, health insurance protects you from financial problems stemming from medical costs when you become ill. These include doctor’s appointments, hospitalization, medicine, tests, and surgeries. Health insurance also provides benefits if you’re diagnosed with any of the pre-defined critical illnesses, such as heart attacks, strokes, and cancer.

Meanwhile, life insurance is designed to protect your beneficiaries from immediate financial issues, such as loss of income by releasing cash upon your death due to accident or illness. You may be also covered if you suffer a permanent disability that leaves you unable to work and provide for your family.

Life insurance also comes in two types: term life insurance that covers you for a specific period of time, which range from a month to several years, and whole life that covers you until your death.

For how long are you covered?

For health insurance, as long as you continue paying the regular premiums, you’re covered. Usually this is a yearly renewable policy or can be adjusted to monthly terms, depending on the policy you choose.

Life insurance covers for a specific duration or your whole life. Some policies can be paid in full up front or monthly for a fixed number of years.

Benefits to you

In addition to easing the financial burden due to medical expenses, some health insurance providers may reimburse a portion of what you’ve already paid even if you don’t get sick.

Some health plans allow you to get a cash amount if you’ve been diagnosed with a critical illness.

For life insurance, your beneficiary can get the full amount in your policy when you pass away before you completely paid the premiums. The cash sum may vary with some policies, but it usually starts at PHP 1 million.

Term life insurance also allows you to get back as much as you paid in premiums if you live after a certain age.

Some policies allow you to invest part of your insurance into other financial instruments, which produces additional income.

How much should you invest?

Health insurance is paid annually. Depending on your desired coverage and your age, you may start for as low as PHP 1,000 to PHP 3,000 a month.

More comprehensive coverage, especially for older individuals, may go over PHP 100,000 a year.

Pure life insurance could start for as low as PHP 3,000 a month under a 10-year payment term. Premiums could be higher depending on several factors such as income, age, and existing medical conditions.

Check out the illustration below for a quick view of the difference between life insurance and health insurance.

Difference between life insurance and health insurance

Read also our article on 5 reasons why you should get health insurance now.

Insurance is the next step towards learning financial management. You can start by saving for the rainy days and getting insurance coverage. Learn more about it on metrobank.com.ph/AXA-personal-accident-insurance

This article is part of a collection of stories and practical financial tips that are published with the goal to help people learn from the experiences of others, and to pick out lessons on personal finance and sound money habits beyond the pandemic.