Jagoinvestor

June 10, 2013

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.

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 ?

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Nishtha
Nishtha
8 years ago

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

RAMESH CHANDRA
RAMESH CHANDRA
9 years ago

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.,

RAMESH CHANDRA
RAMESH CHANDRA
9 years ago

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.

swaraj
swaraj
10 years ago

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.

DEEPAK SHARMA
DEEPAK SHARMA
10 years ago

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.

Amish Mistry
Amish Mistry
10 years ago

Claim settelment Ratio for latest comparition till date or which co is better for Term plan

Jatin Patel
Jatin Patel
10 years ago

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

Chetan Ambi
Chetan Ambi
10 years ago

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.

feroz
feroz
10 years ago

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

harpreet
harpreet
10 years ago

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

satheesh kumar b s
satheesh kumar b s
10 years ago

doing a very good job
keep up Mr. Manish

Jay Harkhani
Jay Harkhani
10 years ago

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.

Vivek Vatve
Vivek Vatve
10 years ago

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]

Khanna
Khanna
10 years ago

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

vikas
vikas
10 years ago

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

Venu
Venu
10 years ago

I fee Term Insurance is the correct choice.

Need for money can be arranged for the family member from anysource as the requirement is normally short term. But after death the need for money is not short term and is required for the whole life for the family.

Vivek
Vivek
10 years ago

If dependents are there, Term insurance is an obligation one must fulfill…..

Anyways, now a days, Employers provide Health Insurance coverage, although, meagre amount. In that case, the customers can go for Top-up Health Insurance which more than 50% cheaper. It will kick in only after threshold limit is exhausted…Its a better choice if you have limited money to pay for premiums, as you say…..More importantly, if one is above 35 years of age, comprehensive Health Insurance is as important as having food…I would suggest if one has limited money, then he should become more frugal and cut back on unnecessary expenses. It will go a long way.

Somashekar
Somashekar
10 years ago

Hi Manish,

Need your expertise here. I am Somashekar, 24 years old working in a BPO earning 25k per month. My family is completely depending on me. I have reliance cash flow policy for which Iam paying 12k premium per annum and the SA is 1,79,500. I have health insurance coverage of 5 lakh from company. Since my family is. completely dependant on me, I wanna buy term insurance of 50 lakh sum assured. Please suggest me the good insurance policy. Also, please suggest if there are any other plans. Awaiting your reply. Thanks..

Parag Rodrigues
Parag Rodrigues
Reply to  Somashekar
10 years ago

Hi Somashekhar,

Aegon Religare has very good customer Service & they have been the 1st company to start with online term insurance policy. Yo can ask all your queries & they are very patient & clarifies all your doubts.

With your age of 24 yrs, you can extend your term coverage for 40 yrs (i.e. 64 yrs coverage) & your premium would be very less under Aegon Religare Term plan.

Aside, if your medical test is very good then you may get further deduction in your overall premium charges (approx. Rs. 600-700)

You may buyout policy coverage of Rs. 1 Crore.Check for self via Aegon religare site.

Other alternative option would ve Aviva ILife as it do have coverage till 35 yrs.

I would recommend to have 2 Term insurance policy with distributed amount of 50 Lacs each.

Have Good day ahead… 🙂

premjipmb
premjipmb
10 years ago

For people who are young and having children, they must take cover of ‘term plan’. When they are earning, medical expenses can be covered. However for old age, ‘health insurance’ is preferable as children may already be earning their own keep.

Jai
Jai
10 years ago

Hi Manish,
I recently came across a friend, who said his bank is providing him with Medical Insurance Family floater for his entire family along with his parents at a very affordable price because he is a account holder.

Can you give us your in-depth view about this kind of Policies, and also compare them with those health policies provided by Independent Health insurers.

A article like this would be quite helpful.

Thanks
Jai

dev
dev
Reply to  Jagoinvestor
10 years ago

manish can you please elaborate ur view…..on this group policy’s.offered by public sector banks.
bcoz there premium are low,benefits are good & they also provide TPA.
how they stand different compair others?

mahesh shah
mahesh shah
Reply to  Jai
10 years ago

GO FOR ABANK OF INDIA=NATIONAL MADICLAIM POLICY……S.A.-100000…PREMIUM ONLY RS.1750…..C0VERAGE FOR 4 PERSONS…!…