Choosing Between Health Insurance and Life Insurance
For some people the distinction between health and life insurance is not always clear. In addition, finances sometimes require choosing 1 over the other. Here are some considerations that may assist in the process. Health insurance protects you from extensive medical expenses by offering full or partial coverage of certain medical treatments and procedures. Life insurance, on the other hand, is an insurance policy that pays out the face value of the policy in a lump-sum payment upon the death of the insured to the person designated as the beneficiary. Term Life Insurance There are 2 basic types of life insurance: whole life and term life. Term life insurance is by far the less expensive of the 2 because it offers just life insurance. A term life insurance policy can be purchased for as little as 1 year or for as long as 30 years. In order for the beneficiary to cash in on the policy, the insured must die sometime during the term. This is probably why so many people wait until they are older before purchasing life insurance. Whole Life Insurance Whole life insurance is a combination of a life insurance policy and an investment plan. The premium paid on the whole life policy is shared between the 2, with a portion going towards the life insurance premium and the balance being invested into whichever investment vehicle has been chosen: mutual fund, money market, stocks and bonds, etc. The benefit of a whole life policy is that it forces the insured to save money for retirement by using a portion of the premium as investment money. In reality however, these policies are usually loaded with fees and commissions, and after taking these costs into consideration, it often is not the best use of an individual's investment dollars. Health Insurance A life insurance policy is totally different from a health insurance policy, although the price for each ultimately depends upon a person's age and physical well-being. In general, individuals who are young and healthy pay less than those who are older, and especially those who are older and in poor health. It's probably not possible to advise a person regarding which is better, a health insurance policy or a life insurance policy. Many people obtain health insurance through their employer, and many employers also offer as a benefit the ability to purchase a low face value life insurance policy for a nominal cost. If this is your situation, it's advisable to take advantage of both benefits. Points to Consider Otherwise, deciding which insurance policy to purchase becomes more a matter of how much you can afford each month and your personal situation. It's advisable to choose health insurance coverage, even though it probably will be more expensive, because it only takes 1 uninsured medical illness or accident to leave you with insurmountable medical bills. Also consider this: If you don't have health insurance, and your medical bills (and/or other bills) are considerable, it might be a good idea to purchase term life insurance with a high face value to pay off your bills, and designate your spouse as your beneficiary. That way, your spouse won't have to worry about inheriting a sizeable debt. |