Term plan or Health Insurance ? Which is more Important if you have limited money ?

Few weeks back, I posted an interesting question on our Facebook Page asking – “Given limited money – which is more important product to buy from security point of view – Term Insurance or Health Insurance ?” .

life insurance or health insurance

Lets say there is a guy – who wants both a term plan and a health insurance for his family and he only has Rs 10,000 per annum left with him, now he can either buy a 1 crore term plan for his family or buy a 5 lacs cover for his family. But he will be able to get only one of them from this Rs 10,000 left with him, then which out of term plan and health insurance is makes sense for family and is more useful? Lets see some points, raised by our facebook fans, which will help us to think about it.

1. Death is less probable compared to hospitalization

One of the argument is that, there are far greater chances of getting hospitalized because of some reason then dying. So if you look at this problem from probability point of view, you can be almost sure that in next 5-10 yrs, you or one of your family member will be hospitalized for some or the other reason – big or small. But meeting death is very less likely in comparison. So a lot of people argued that Health insurance is much more important than term plan, if you have limited money.

You can get good comparision of helath insurance at Coverfox website

2. Premiums are increasing fast in Health Insurance and its can be claim every year

Another argument in favor of health insurance over a term plan was that, its a product where you can claim every year and protects your financial life from regular attacks of money sucking illnesses and accidents and anyways premiums are increasing very fast for health insurance (or would increase in future) because of the health care inflation. However for term plan the premiums are coming down over the years (now we might be close to saturation) .

3. Hospitalization Costs can be arranged in worst case

Now some people said that term plan is more important than health insurance and the biggest reason for it was that health insurance expenses are somehow manageable in worst case. You can take a loan, swipe a credit card, ask your friends and relatives or in worst case, sell some of your home stuff.

Life will again be on track somehow. But if you ignore term plan, its a very big risk for your family future, because the amount required by your family cant be arranged by asking it from someone (just imagine you die and now your family would need their monthly expenses for lifetime , your children expenses for current and future, their whole life is at stake now). It would generally run into several lacs or few crores.

life or health insurance

High Probability – Low Impact

So its very clear that term plan has a very high impact on your financial life, but less probability of its occurrence , however health insurance has low impact on your financial life (compared to term plan) , but is high on probability and its has potential to occur multiple times in your lifetime.

Balancing both Health and Life Insurance Costs

Another workable option is to divide the money into premiums for both term plan and health insurance, but in this case you will compromise with the cover amount of both the things however small it is. This way you will have both the things in your financial life, even if its small . Do you think its a workable solution ?

What is your opinion about this question ?

76 CommentsAdd Comment

  1. Nishtha

    I too believe both are important and yes with dependents Term Insurance is important. If there is a long history in the family of a particular illness then Health Insurance can prove to be very useful. So it actually depends more on the priority of each person. I have recently bought tata aia life’s money back Insurance plan this plan gives you the flexibility to choose from various term options to meet your financial commitments with the advantage of paying for only half the term. https://www.youtube.com/watch?v=pt9zffdjBkw

  2. RAMESH CHANDRA

    So i can opt any one fm above listed cos. what abt AEgon???
    Is is good option to choose it for term insurance as they are offering the same on low premium.( apprx 9999 for 75 Lac). can i bank on it?
    Pls advise as i am fully depend on your suggestion as no idea how this will work for me.,

  3. RAMESH CHANDRA

    Dear Manish

    Hi! I am Ramesh chandra and 40 yrs old. I am looking for term insurance plan for 50 -75 L. Pls suggest me which company is having best term plan and claim ration is also good. Premium for LIC & HDFC are too high considering the amount left with me after monthy expenses. Pls suggest good one.

  4. swaraj

    Hope I am not too late to comment but to me the situation sounds like there is more to it than is related here.Priority for that person has to be have health insurance and term insurance first then only other investment and expenses.Even if we take the hypothetical case where income is low and guy only has 10,000 only then he should aim for more realistic term insurance(perhaps 25 lacs only …remember meeting death probability is very low) and invest rest in a health insurance policy which let’s him increase his cover if tomorrow his income is more.

  5. DEEPAK SHARMA

    hai friends I am Deepak new member in jago investors family, I am planning to buy 50 lac amt term policy , please suggest which company is better to buy.

  6. Jatin Patel

    What is your view on – ICICI Prudential Crisis Cover Plan
    I want to take critical illness policy. I want it up to minimum 15 t0 20 years. My age is 26. Is it good among others? Is there any other plan in which i can include my wife also

  7. Chetan Ambi

    I think term insurance scores over health insurance. As I agree with what dear Ashal Jauhari told above i.e. we just need to think out of the box to arrange money to have both life and health insurance.

  8. feroz

    WHAT IS DIFFERENCE HEALTH INSURANCE VS MEDICALIM INSURANCE??
    WHAT IS BENEFIT FOR ME. I HAVE 1 MEDICAL INSURANCE MAX BUMPA AND 1 HEALTH INSURANCE MAX LIFE WELLNESS PLUS PLAN AND HOSPITAL CASH

  9. harpreet

    Dear Sir,
    i am working in Merchant Navy as marine engineer, my job profile is that i have to remain on ship for 4 months and come back home and stay for 3 months on vaccations and again go and join for 4 months and so on.
    Pls let me knw which term plan is best suited for me.
    Thanks and Regards,
    Harpreet

  10. Jay Harkhani

    I think one should look at it location where he/she is residing. Say a guy might need 1 crore life insurance for metro location, same guy might need around 50-60 lakh life insurance for smaller cities.

    Balance will be good, that is go for 1-2 lakh of health insurance, and rest of life insurance. In health insurance most co. are paying bonus for claim free year, so you will get addition 5-10% increase in your sum assured.

  11. Vivek Vatve

    Sir,
    In my view the term insurance is the better option.
    -Because if you get hospitalised then your relatives, friends or neighbours may help you either way. They may arrange for the money needed at that particular time. (which they trust that you will return it back as early as possible after you feel good and join your duties.) So, you may come out of that situation of fund raising at the time of hospitalisation.
    -But, If you die then what?…
    Generally whenever someone dies, all the relatives or friends, neighbours come for the funeral or they come to meet your family showing sympathy. They also assure them that they will help them whenever they need it. But is that really happens? No. All the words given are for the time sake for those first 13 days of the death. And after the continuation of the 14th day no one from these comes to help you, instead all the others from whom the dead person had took money or who had given money to him for some works will start to come. And no one will be there now to help you.
    So, for securing our family from the financial losses and also to settle those debts we had taken inclusive of financial institutions the term insurance is the Best Solution. So I think that the TERM INSURANCE IS THE BETTER OPTION.
    -Vivek Vatve
    [email protected]

  12. Khanna

    Hi Manish,
    First of all I would like to thank you for your great contribution to the investor society .:)
    well JD group, my question is that i wanted to buy a term insurance plan for 50 lakhs. some one suggested me that i should take 25 lakh cover from LIC and rest cover from other insurance company like HDFC, aviva or bajaj. but as we all know that the premium for LIC would be around 8000 for 25 lakh will is quite high in comparison to others, but have high surety for getting the SA in case of LIC. Do you think that this approach is ok, Should i go with 50 % LIC and rest with other private player or be with private players only and drop off with LIC.
    Inputs will be highly appreciated.

    Thanks

  13. vikas

    for service folks we have term insurance and health both are provided by employer then why we need to do health insurance again.

    its good to term insurance, as earlier we start cheaper it would be.

    I have basic question on health insurance
    If someone have health insurance (family included ) provided by employer then why we need any health insurance.
    I think in such case we should invest health insurance amount in some other place
    and should do health insurance whenever our future employer is not providing health insurance.

    Any more artical reference in this direction are welcome

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