Term Insurance Vs Health Insurance: The Major Differences
| If you had to choose between health and term insurance, which one would you pick? It’s a tricky question and one that confuses many. In fact, 22% of Indians don’t have term insurance simply because they already have or prefer health insurance. But here’s the catch: it shouldn’t be an either-or situation when it comes to Term Vs Health Insurance. At Ditto, we believe both are essential, and in this blog, we’ll explain why. |
| Feature | Term Insurance | Health Insurance |
|---|---|---|
| Purpose | Financial security for dependents on the death of the earning member | Covers medical expenses during life for all members |
| Payout Type | Lump sum or staggered payout upon death | Reimbursement/cashless for medical bills |
| Maturity Benefits | None (Unless Return of Premium opted) | Typically none |
| Riders Available | Accidental Death, Waiver of Premium, Critical Illness Benefit | Consumables coverage Maternity, Daily Cash |
| Premium Cost | Varies with age, duration, occupation, medical history, and sum assured, but remains fixed for the entire duration after purchase. | Varies with age, location, pre-existing conditions, and increases after purchase due to medical inflation & age. |
| Ideal For | Family protection, long-term financial planning | Managing short to medium-term medical expenses |
| Tax Benefits (only for Old Tax Regime) |
Deductions under Section 80C. | Deductions under Section 80D. |
Are you unsure which plan best fits your needs? Whether you're debating between term and health insurance or want to help customize your coverage, our advisors are here to guide you.
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Term Insurance vs Health Insurance: Which Should You Buy First?
The short answer: Start with Health Insurance. Term Insurance comes next.
Why Health Insurance First?
- The Likelihood Factor: You’re far more likely to face a medical emergency than an untimely death in your 20s or 30s. A single hospitalization can cost ₹2–5 lakhs, which is enough to wipe out years of savings.
- You can’t delay a Health Crisis: Medical conditions and accidents don’t come with a warning. Waiting to buy health insurance means:
- Long waiting periods (up to 3 years) for pre-existing conditions
- Higher premiums as you age and get diagnosed with a health condition (loading charges)
- Risk of outright rejection for certain critical ailments (Cancer, Autoimmune diseases)
- Employer Cover Isn’t Enough: Your corporate health plan may not stay with you when you change jobs or retire, and even if it does, the sum insured is often too low.
Think of health insurance as a helmet while riding a bike. Even if you’re a safe rider, you can’t control the road.
Why Term Insurance Comes Second (But Still Vital)
- It’s Not for You; it’s for Them: Once you have or are planning to have dependents (spouse, kids, or parents relying on your income), term insurance ensures they can repay loans, cover household expenses, and fund long-term goals in your absence.
- Peace of Mind for a Low Price: A ₹1 crore term cover can cost as little as ₹1,000/month if you buy early. Unlike health insurance, the premium stays fixed for the entire term.
Term insurance is like a parachute. You hope you never need it, but if you fall, it’s the only thing that ensures your family lands safely.
| Ditto’s Tip: Before adding a rider, check if you're already covered through your health, accident, or employer-provided insurance. Ask yourself if the rider truly fits your needs or if you’re adding it just in case. At Ditto, our advisors often help users cut down on unnecessary riders, saving money without losing essential protection. |
Term Insurance vs Health Insurance: Why You Shouldn’t Choose Just One?
Looking at it from a Term Life Insurance Vs Health Insurance angle is perhaps the wrong way to think about it. Health and term insurance serve two distinct, non-overlapping purposes. And together, they offer complete protection.
- Health Insurance protects your savings by covering medical bills and hospitalization expenses.
- Term Insurance safeguards your family’s future by replacing your income if you’re no longer around.
Skipping either leaves a critical gap in your financial safety net:
- Without health insurance, one illness can wipe out your wealth.
- Without term insurance, your family may struggle to stay afloat in your absence.
The Layered Financial Safety Net
Use this approach to build financial resilience:
- Emergency Fund – 3–6 months of basic expenses
- Health Insurance – Medical safety net for you & your family
- Term Insurance – Long-term income replacement for dependents
- Savings & Liquidity – Fixed deposits, debt funds, etc.
- Investments – Mutual funds, stocks, real estate
Ditto’s Take: Buying insurance isn’t about predicting the future. It’s about being prepared for it. Don’t build your financial skyscraper on shaky ground. Secure the base first, with health and term insurance, so the rest of your financial life stands tall and stable.
Term Insurance vs Health Insurance: Are Combo Policies Worth It?
No, it is usually better to keep life and health insurance separate. Some insurers do offer bundled plans that combine term life insurance and health cover into a single product. At first glance, these combo policies seem convenient because they solve the problem of term insurance vs health insurance, and you pay one premium for one policy. However, in reality, they come with several drawbacks.
Key Drawbacks of Combo Policies
- Compromise on Coverage
The life cover is often insufficient, while the health cover tends to be basic or limited. These plans may also lack flexibility, such as no add-ons to reduce waiting periods, limited network hospitals, and complex claims procedures. - More Expensive in the Long Run
As you age and develop medical issues, premiums for health coverage typically rise due to loading charges. So, sticking with a limited combo plan can cost you more than two separate standalone policies (bought when you are young and healthy). - Rigid Structure
Upgrading your health cover later is not easy. You also cannot port the health portion to another insurer because it is tied to the life insurance component. - Unnecessary Lock-In
Many combo plans lock you in for long durations (due to the life insurance component), such as 10–20 years, which does not align with how health insurance needs evolve as your medical history and family situations change. The worst part? you cannot split the policy and choose which one to renew.
Case Study: HDFC Life Click 2 Protect Optima Secure
1) Combo Plan
- Health Cover: ₹15 Lakhs under HDFC ERGO Optima Secure (includes 2x cover from day 1, loyalty bonus, no room rent limit, restoration, etc.)
- Life Cover: ₹50,000 till age 65 under HDFC Life (no critical illness rider, no waiver of premium, no accidental disability)
- Premium: ₹17,092 per year (₹16,685 for health + ₹407 for term) for a 30-year-old male in a Tier I city.
2) Separate Policies (Same Insurers)
- Term Insurance: HDFC Life Click 2 Protect Super
- Sum Assured: ₹1 Crore.
- Policy Term: Till age 65
- Premium: ₹15,499/year (₹16,315 from 2nd year)
- Health Insurance: HDFC ERGO Optima Secure (Standalone)
- Sum Insured: ₹15 Lakhs
- Premium: ₹17,656/year
- Add-on Benefits Available: Unlimited Restoration, OPD Rider
Cost Comparison
- Combo Plan: ₹17,092 for ₹5L Health + ₹50 lakhs Life
- Separate Plans: ₹33,155 for ₹15L Health + ₹1 Cr Life
Insights and Evaluation
The combo plan looks cheaper upfront, but it falls short in critical areas. The life cover of ₹50 lakhs is inadequate and does not serve the real purpose of term insurance, which is to replace income. In addition, there are no essential riders like waiver of premium or accidental disability cover.
On the other hand, the health coverage is limited and lacks the flexibility of standalone policies. Most importantly, the bundled life cover provides only a false sense of security, as it does not offer meaningful protection for dependents.
Ditto’s Recommendation
Do not compromise on coverage for the sake of convenience or small, short-term savings. Standalone term and health insurance policies allow customization, better protection, and long-term value. While a combo plan like Click 2 Protect Optima Secure may seem appealing initially, it cannot compare to the comprehensive protection of separate, well-structured policies.
Now that we’ve covered why standalone policies are the smarter choice, let’s look at some of the best term insurance plans in 2025 that offer comprehensive coverage and strong claim support.
Best Term Insurance Plans in 2025
| Term Plan | Premiums (1 crore term plan for a 30-year-old non-smoker man till age 60) | Premiums (2 crore for a 40-year-old woman who smokes, taken till age 70) | Premiums (1.5 crore cover till age 65 for a 35-year-old man who doesn’t smoke) | Metrics (Avg 2022-25) | Coverage and Available Riders |
|---|---|---|---|---|---|
| HDFC Life Click 2 Protect Super | ₹13,499.08 (first year)₹14,210 (second year onwards) | ₹82,886.52 (first year)₹87,249 (second year onwards) | ₹26,228.04 (first year) ₹27,608 (second year onwards) | CSR: 99.5%ASR: 93.9%Solvency Ratio: 1.9Complaint Volume: 1.3 per 10K claims | Accidental & Terminal Illness, Critical Illness (60), Disability Waiver, Return of Premium, Inflation Protection |
| Axis Max Life Smart Term Plan Plus | ₹10,336.92(first year)₹12,161(second year onwards) | ₹59,481.91(first year)₹69,979(second year onwards) | ₹23,536.40₹27,690 | CSR: 99.6%ASR: 96.2%Solvency Ratio: 1.9Complaint Volume: 5.7 per 10K claims | Accidental Death, Critical Illness (64), Women’s Perks, Smart Cover (1.5x), Waiver of Premium, Zero-Cost Exit |
| ICICI Prudential iProtect Smart Plus | ₹11,098(first year)₹12,683(second year onwards) | ₹59,074.00(first year)₹67,513(second year onwards) | ₹21,082.00₹24,094 | CSR: 98%ASR: 95.1%Solvency Ratio: 2Complaint Volume: 11 per 10K claims | Accidental & Terminal Illness, Life Stage Benefit, Critical Illness (60), Instant Payout, Zero-Cost Exit |
Just as term insurance safeguards your family’s financial future, choosing the right health insurance plan is crucial to protect your savings from rising medical costs. Let’s look at some of the best health insurance plans in 2025.
Best Health Insurance Plans in 2025
| Health Insurance Plan | 1st Year Premium for a 30-year-old male (non-smoker with no PEDs) for a 50 lakh cover | 1st Year Premium for a family of 3 for a 15 lakh cover with the oldest member being a 30-year-old male (no smokers) | Metrics (Average of data from the last three available years) | Available Riders | Coverage and Available Riders |
|---|---|---|---|---|---|
| HDFC ERGO Optima Secure | ₹21,299.00 (no added riders) | ₹33,048.09 (all riders added) | CSR: 97.5% ICR: 85.2% Complaint Volume: 7 per 10K claims |
Unlimited Restoration,Hospital Cash Benefit,Optima Well-being | Accidental & Terminal Illness, Critical Illness (60), Disability Waiver, Return of Premium, Inflation Protection |
| Care Supreme | ₹12,822.75 (includes mandatory riders) | ₹28,245.47 (all riders added) | CSR: 90% ICR: 58% Complaint Volume: 36 per 10K claims |
Air Ambulance, OPD Care, Bonus Boosters, Instant Cover | Accidental Death, Critical Illness (64), Women’s Perks, Smart Cover (1.5x), Waiver of Premium, Zero-Cost Exit |
| Aditya Birla Activ One Max | ₹14,405.43 (no added riders) | ₹35,830.78 (all riders added) | CSR: 95% ICR: 61.4% Complaint Volume: 22 per 10K claims |
Chronic Management Program (OPD),Chronic Care,Reduction in PED waiting period. | Accidental & Terminal Illness, Life Stage Benefit, Critical Illness (60), Instant Payout, Zero-Cost Exit |
Why Approach Ditto for Your Insurance Policy?
At Ditto, we’ve assisted over 7,00,000 customers with choosing the right insurance policy. Why customers like Ajay below love us:
✅ Honest advice – no commission-driven recommendations
✅ 12,000+ 5-star reviews (Rated 4.9 on Google)
✅ Real claim experience – we've helped customers through actual claims
✅ Trusted by Zerodha and other leading fintech companies
Conclusion
When it comes to the Term Insurance Vs Health Insurance debate, it’s not about choosing one over the other; both are essential pillars of your financial security. Start with health insurance to protect your savings from medical shocks, then add term insurance once your income becomes vital to your family. Together, they form the foundation of a strong financial plan, ensuring you and your loved ones are secure no matter what life throws your way.
FAQ’s
How long should the policy term be for Term Insurance and Health Insurance?
For term insurance, the policy term should ideally last until retirement age (60–70 years) or until your children are financially independent and you have cleared major loans. For health insurance, opt for a plan that is renewable lifelong, so you’re covered well into old age when healthcare costs are highest.
Do I even need term insurance and health insurance if I feel healthy and secure?
Yes. The best time to buy term insurance and health insurance is when you’re healthy, as premiums are lower and approval is easier. Insurance isn’t about the odds but about protecting yourself and your family from the financial consequences of worst-case scenarios.
Do I still need comprehensive health insurance if I have a term plan with a critical illness rider?
Yes. A term insurance critical illness rider only pays a lump sum for specified illnesses, while comprehensive health insurance covers hospitalization, surgeries, and medical bills for all ailments. Both work together, but health insurance is your primary line of defence for managing everyday medical expenses.
Can I take term insurance and health insurance together?
Yes. You absolutely can and should. Term insurance protects your family financially in case of your death, while health insurance covers medical expenses, making them complementary.
I feel uncomfortable talking about death; can’t I just skip term insurance?
Term insurance isn’t about focusing on death; it’s about replacing your income and ensuring your loved ones stay financially secure. Think of it as a gift of certainty and protection, not a bet on death.
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