Health insurance can help cover the short term by paying for immediate medical bills and health expenses. Life insurance, on the other hand, offers long term coverage and can help financially protect you and your family in the event of debilitating illness or death.
Life insurance vs. health insurance
Health insurance protects you financially if you get sick or injured. Life insurance protects your loved ones financially if you pass away. Some life insurance policies can also provide additional financial protection for you and your family if you get sick or injured by paying you a lump sum to cover what health insurance won’t.
|Life insurance||Health insurance|
|Definition||An insurance policy that covers specified life events, such as death, disability and serious illness or injury.||An insurance policy that covers medical appointments, procedures, prescriptions and hospitalizations.|
|Who gets paid?||Payments are made directly to the policyholder.||Payments are made directly to medical professionals for services or prescriptions.|
|When do they get paid?||After the specified event takes place. For example, term life insurance pays out upon death, and critical illness insurance pays out upon diagnosis.||After billing for a medical appointment, procedure, prescription or hospitalization.|
|How much do they get paid?||The amount listed in the policy.||As much as is required to pay medical costs, minus any deductibles and copays listed in the policy.|
|What can the money be used for?||Anything — there are no stipulations on how funds can be used.||Medical bills.|
Life insurance provides a lump sum benefit in the event of the policy owner’s death or if diagnosed with a terminal illness and not expected to live for longer than 12 months. This lump-sum benefit ensures that the policy owner is able to meet their financial obligations without leaving any financial burden behind to their friends or family. It can also help your family pay for any expenses after you pass, including mortgage payments, school and day-to-day needs.
Critical illness insurance
A critical illness insurance policy can be added onto or bundled with traditional life insurance. It can provide a lump sum benefit in the event that the insured suffers a condition such as stroke, cancer or heart attack. While health insurance can provide assistance in covering some medical and hospital expenses, life insurance with critical illness benefits will help cover financial obligations that you could face after being forced out of work, such as:
- Equipment for rehabilitation
- Nursing care
- Home or car modifications
- Keeping up with debts and bills
Health insurance pays doctors and hospitals directly for medical costs — it doesn’t pay you for any financial hardship. Depending on your policy, your health insurance may cover:
- Doctor’s appointments
- Prescription medications
- Home nurse care
- Hospital expenses
- Ambulance services
- Overseas medical costs
- Physical therapy
- Chiropractic treatment
- Dental and vision care
Compare life insurance policies
Do I need a life insurance policy if I have health insurance?
Yes. Life insurance covers you in a completely different way, and you need both to be fully financially protected. Life insurance can provide coverage for:
- Your child’s education
- Buying a new house or paying off a mortgage
- Paying off your credit card debt
- Day-to-day expenses after the loss of your income
- Ongoing medical expenses not covered by health insurance
- Hiring a caretaker
- Modifications to your home
- Recovery costs
While health insurance can cover immediate hospital and medical expenses, it will not provide support for your mortgage, school expenses for your children, food, rent, clothing and any other expense that will need to be taken care of. A life insurance policy can protect your loved ones from the loss of your income.
Frequently asked questions
More guides on Finder
A beginner’s guide to retirement investing
What you need to know to start building your retirement nest egg.
Life insurance for seniors over 70
A final expense life insurance policy may be your best option in your 70s, especially if you have prior health problems.
How to start a vending machine business
Is a vending machine business a low-cost, easy-start business idea? Find out what’s involved with a vending machine business and how you might finance it.
What happens to my home loan if I die?
Learn about what will happen to your home loan when you die and how to avoid any nasty situations with some pre-planning.
How to move to Canada
Explore the options and programs that Canada has in place to help you move to Canada.
What is health insurance cost sharing?
Learn cost-sharing terms to find out how much you’ll really pay for healthcare.
Lemonade life insurance review
This fintech just branched out into low-cost life insurance — but its lineup is limited.
Combined life insurance review July 2021
Find unusually low face values for a whole life policy, ideal for supplemental insurance.
Wagmo pet insurance review Jul 2021
Get pet insurance that reimburses 100% of your vet bills or a separate wellness plan.
Original Medicare vs. Medicare Advantage
Compare the costs, coverage and eligibility of these two popular plans.
Ask an Expert