Life Insurance vs Health Insurance

Last updated: 22/06/2023 | Estimated Reading Time: 9 minutes

When it comes to finding the right life or health insurance policy to suit you and your family’s needs, there are many things to consider. Factors such as your budget, existing health conditions and plans to buy a home will all need to be considered. 

However, being aware of your needs and limitations will only take you so far. Before you begin weighing up the pros and cons of different types of health insurance or life insurance, it’s important to understand the difference between them.

This guide will explore what life and health insurance cover can offer you, and which of them suits your needs and lifestyle best.

In This Guide:

What is Life Insurance?

Life insurance is designed to keep your loved ones covered with more financial stability via the payment of a death benefit if you unexpectedly die during the terms of your policy. While most insurance is renewed on an annual basis, a life insurance policy is usually purchased for a specified length of time.

What are the Different Kinds of Life Insurance Available?

Generally speaking, life insurance policies fall under the following categories:

Level Term Insurance

This pays out a fixed amount to beneficiaries if you die within the terms of the policy. The length of those terms is agreed upon at the beginning of the policy. 

level term insurance plan will pay money out to your beneficiaries, and the amount of money paid will remain the same, regardless of how far into the policy term. Terms are typically between ten to twenty five years, although this isn’t a rule. 

Decreasing Term Insurance

A decreasing term insurance policy helps dependents to pay off something specific that has a financial impact in the event of your death, like a mortgage payment. Decreasing cover is also commonly known as mortgage life insurance. 

The term length of a policy like this tends to be the same as the remaining terms of your debt. For example, the length of the term could be identical to the remaining terms of your mortgage. 

Joint Life Insurance

With a joint policy, a lump sum will be paid (in the event of your death) to the chosen beneficiary on your joint cover. Likewise, a lump sum would be paid out to you if the other person listed on your policy dies. 

The individual listed on your policy could be a business partner, a friend, a family member or even your children. 

Family Income Benefit 

Also referred to as FIB policies, family income benefit policies pay a regular tax-free income to your loved ones in the event of your death, instead of a single lump sum. 

This kind of payment means financial assistance that’s easier to manage for beneficiaries, due to the death benefit being paid out over a set period of time. 

For example, let’s say that you’ve determined your family needs £1,500 a month for the next 20 years and pay for a policy to make sure they’re covered for that amount. If you die after three years, then your family will be paid £1,500 a month for the remaining 17 years. 

Over 50s Life Insurance 

Aimed at helping family members to pay for things like funeral expenses, over 50s cover is a whole-of-life policy, which means it will pay out a death benefit when the policyholder dies. 

The majority of these policies come with guaranteed acceptance without the need for any medical examinations or questioning, making them a great potential choice for people with pre-existing conditions.

What are the Benefits of Life Insurance?

While life insurance policies can vary, the general benefits are as follows.

  • Life insurance pays out amounts that help family members with their finances
  • Life insurance covers outstanding debts to help loved ones pay the cost after you die 
  • The right policy will protect the people you love and give you peace of mind 
  • Some life insurance cover helps to pay for funeral costs

What is Health Insurance?

Health insurance policies, also called Private Medical Insurance, help cover medical treatment costs for private hospitals and private healthcare needs. With Private Medical Insurance, people can potentially receive treatment for illnesses and ailments within a matter of weeks compared to an average potential waiting time of over 3 months on the NHS.

Private health insurance cover allows people to enjoy private hospital care with their very own private room. When it comes to fees for medical expenses and other healthcare costs, paying health insurance cover is usually done via annual premiums. 

What Does Health Insurance Cover? 

Both health and life insurance services offer you different types of policies and financial cover depending on your circumstances. The amount of cover you get and the specific conditions you’re covered for will depend on the health insurance policy you take out. 

Much like other policies, health insurance cover can be limited or in-depth. It ultimately depends on what you need access to in your general healthcare and overall potential medical expenses. 

Health Insurance Policies and Extras 

Below are some of the potential extras and additional benefits that can be added to a standard private health insurance policy. 

Cancer Cover

This covers you for medical treatment relating to cancer. While it may be a useful extra, some health insurance protection offers cancer cover as standard. However, there are extras which also offer potential health treatments that the NHS don’t provide.  

Dental Care Cover

There’s also the option to add extra dental care through regular check-ups and even dental procedures. The costs associated with dental work can add up, so this may be a handy extra for someone with concerns about their dental health, in addition to offering more peace of mind for any future procedures that may be needed. 

Home Nursing Cover

This extra bit of health insurance cover helps with home-based visits and health treatments after you’ve been discharged from the hospital after a procedure. 

What are the Benefits of Health Insurance?

  • Private health insurance offers faster access to doctors and treatments than the UK NHS
  • Health insurance provides you with private healthcare for procedures 
  • With health insurance, you’ll potentially gain access to healthcare drugs that the UK NHS can’t use
  • Health insurance allows you to get medical advice over the phone regarding health matters without having to see your GP 

Critical Illness Cover

Critical illness cover is a kind of insurance that pays out to your beneficiaries if you happen to fall ill from one of the listed conditions on the policy. This means that while your condition may prevent you from working, you’ll have money coming in while going through treatment. 

Critical illness cover is usually sold as an add-on alongside a standard health insurance policy. However, an insurance company may also offer critical illness and life cover, which pays out funds in the event of death or terminal illness. 

Please Note: Not all insurance providers we work with offer all types of policies. Please do your research and compare quotes before proceeding.

Are Life and Health Insurance the Same Thing?

Perhaps due to a few similarities such as the critical illness cover / critical illness and life cover options available when comparing health insurance with life insurance, many people assume they are one and the same.

But there are some vital differences in the life insurance vs health insurance situation that you’ll need to carefully consider before making a final choice.

Life Insurance vs Health Insurance: What is the Difference?

In any life insurance vs health insurance evaluation, the differences between them can usually be summed up in a few sentences. 

Private health insurance is designed to help cover the cost of treatments and surgeries while the policyholder is still alive, with a focus on your health while alive. 

For life insurance, your premiums are paid in order to help cover the cost of a mortgage, funeral, or general living expenses if you die during the policy terms. It’s a one-off payment that helps to provide some financial protection for the future of your loved ones.

Health Insurance vs Life Insurance: The Downsides

Knowing the difference between health insurance and life insurance means also understanding the potential downsides. Of course, whether you consider them an issue or not depends on your specific needs with regard to your life or health insurance plans. 

Life Insurance Cover Downsides

  • Term life insurance policies will cease to protect you after the set policy term and may run out before your death 
  • Poor health usually means higher premiums (although an over 50s policy may help those with pre-existing medical conditions)
  • Any increase in your cover could lead to further medical examinations and questionnaires (this usually isn’t the case with over 50s life insurance) 

Health Insurance Downsides

  • The NHS may give you access to priority treatment if you have a serious illness like cancer or heart disease without the need for health insurance 
  • Paid for healthcare treatment can cost a lot of money and continue to rise each year with age
  • Regardless of how much you pay, treatment for chronic or incurable illnesses isn’t always covered by your health insurance   

Can you buy Health Insurance and Life Insurance Together?

Absolutely. You can always ensure that you’re covered by having access to both health insurance and life insurance. Most insurers offer joint cover or separate policies, depending on what your circumstances are, what you want to be covered for, and how much you want to pay. 

But what matters most is that you’re finding the right protection and the best policy for your needs and the needs of your loved ones, as well as looking into the cost and what you’ll be covered for. With the right combination of these elements, you’ll find the health insurance or life cover that suits your lifestyle and provides for your family after your death.