There are various types of insurance so it is easy to confuse one for the other. There is life insurance and non-life insurance and each category has its variants like term and endowment in the former and health insurance, among others, in the latter.
What is the purpose of life insurance?
Providing life cover to the policyholder is the main objective behind opting for life insurance. The policyholder wants to be sure that his family / dependents can maintain their lifestyle in his absence. In an eventuality, proceeds from the life insurance policy will replace his income allowing his family members to lead a near-normal life as far as the household finances go.
What is the purpose of health insurance?
Health insurance aims at covering the actual cost towards treating illnesses/medical conditions subject to the sum assured. There is no life cover, meaning there is no payout on death.
Need for both in an individual’s portfolio
Clearly, given the distinct benefits of the two forms of insurance, individuals must aim at including both in their portfolios. A life cover is a must for any individual with financial responsibilities towards his family. He must opt for a cover that adequately covers his liabilities and provides for household expenses –an amount that is effectively his ‘human life value’.
Health insurance is a no-brainer really, given that medical contingencies can strike any time and can put your finances under considerable stress.
Individuals must consult their financial planners to understand the various the insurance options and the extent of the cover under each option.
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