Both health insurance and life insurance may seem like they cover the same things. In theory, they do both provide coverage for a variety of things, but their costs, their coverage, and the types of each are a bit different.
If you are looking into buying life insurance or health insurance (or both), then you may be wondering what exactly is covered and how much money it will cost. Here is a simple breakdown of each type of insurance and all the essentials you need to know.
What is Life Insurance?
A life insurance policy ensures that your beneficiary or family will be financially covered if you pass away. It’s essentially a contract between you and the insurance company you choose to house your money.
The way it works is simple: you pay a premium every month to the insurance company and the company in return promises to pay a death benefit to whomever you decide gets the money.
The beneficiaries of your policy are allowed to spend the money on whatever they need, whether it’s college funds, a mortgage, credit debt, and so on. Financial security is a major benefit to anyone who purchases a life insurance policy.
What Are the Types of Life Insurance?
There are three broader life insurance policies: term and whole life. While term life only promises a death benefit if the policyholder passes while the term policy is still active, whole life insurance pays the benefit regardless of the age someone passes away.
Whole life insurance has three subcategories: traditional, universal, and variable. It can get complex trying to understand what each one covers, so here’s a breakdown:
- Traditional life insurance: The premium typically stays the same and you agree to pay them regularly with the company giving you a savings account along with the policy.
- Universal life insurance: You have the option to alter your premium payments and increase your death benefit (if eligible). This policy has more flexibility than other ones.
- Variable life insurance: This policy allows you to invest your payments and savings into stocks or bonds. It is riskier than the other policies.
How Much Does It Cost?
The cost of life insurance policies will vary based on gender, age, type of policy, and overall health.
Life insurance for men will be more expensive than for women. Older people will also have more expensive life insurance than their younger counterparts. If you are in good health with no chronic medical conditions, you can expect a cheaper premium.
Average rates of monthly premiums for young women in good health typically range from as low as $27 to as high as $189 (for a $200,000 life insurance policy). But, for an older male, you can expect to pay up to $260 for the same policy.
Who Would Benefit from a Life Insurance Policy?
While it isn’t necessary to pay for life insurance policies, it is beneficial for everyone to have one, especially those with families.
A policy gives beneficiaries a payout (the death benefit) which is a large sum of money to use as they see fit. This could mean supporting children when they go off to college, paying off stacks of credit card debt, or paying on a mortgage.
Mostly, these policies have the potential to benefit everyone. Any person that has a family, medical bills, debt, or just wants the peace of mind knowing their family will be taken care of financially will benefit from a policy.
What is Health Insurance?
Health insurance is not the easiest form of coverage to come by, but it is necessary to have when you spend a good amount of time in the doctor’s office or if any medical emergencies come up.
Like many other types of insurance, health insurance is an agreement between you (the policyholder) and the company where you pay monthly premiums, and they provide financial coverage for any medical services you need (that are covered in the policy).
What Does it Cover?
When you are deciding on a health insurance policy, it is essential to go over what benefits you have and what services are covered.
All health insurance plans found in the Marketplace cover ten different essentials:
- Outpatient ambulatory care
- Emergency services
- Overnight hospital stays and surgeries
- Pregnancy, maternity, and newborn care
- Care for mental health and substance abuse disorders
- Prescription drugs
- Rehabilitative and habilitative devices (to help with disabilities or recovery)
- Laboratory services
- Chronic disease management
- Pediatric services
Those plans also cover some additional services such as birth control, breastfeeding, dental, and vision. Other plans also cover preventive services such as screenings for diseases and vaccinations.
How Much Does It Cost?
For most insurance plans, policyholders pay monthly premiums on top of deductibles or co-payments for some services.
- Deductibles: This is the amount you pay for medical services in a year before your insurance company pays anything. A study found that the average in 2020 for a single holder was $4,364.
- Co-pays: These are what you pay when you visit a doctor or receive any medical service. If you meet the deductible, your co-pay will be less and you wouldn’t pay the entire cost of the visit.
- Premiums: These are your monthly payments made to your company. In 2020, the average monthly payment for one person was around $456 and for an entire household, it was around $1,152.
Many policy costs will depend on the holder’s age, health, eligibility, needs, and gender. As with other types of insurance (like life insurance), these factors can make premiums increase (i.e., older males with chronic conditions) or decrease (i.e., healthy females who are younger).
If you are paying for insurance for other family members, then the monthly cost would be higher than someone only paying for themselves.
Who Would Benefit from It?
Like with life insurance policies, mostly everyone can benefit from having a health insurance policy. You can never know when you might need emergency medical help and costs for a visit to the ER, use of an ambulance or a life flight can quickly drain your bank account if you aren’t covered.
It comes with perks such as free preventive measures (vaccines, screening, and tests), lower payments for in-network care, and fewer chances of paying outrageous emergency medical bills.
People who visit frequently, such as anyone with a chronic illness or prone to sickness, can benefit from having health insurance that helps relieve some of the financial burdens.
The Recap
Both health and life insurance are very beneficial options to have and can give you financial relief from any unexpected events.
If you’re still unsure as to what exactly each policy covers, here’s a recap to jog your memory.
In the event of the death of the policyholder, life insurance gives the beneficiaries the payout, which is all the money the policyholder paid through premiums to the company.
This policy allows the beneficiaries to take the money and pay off things as needed.
Health insurance requires policyholders to pay monthly premiums, co-pays, and deductibles. In return, the company covers essential medical expenses, like emergencies, surgeries, prescription medications, etc.
Both are needed and everyone can benefit from having both types of insurance.