A quick guide to health insurance vs. life insurance
“Get access to better health services”. “Safeguard against financial losses”. “Protect you and your loved ones”.
You’ll often hear statements like these in relation to health and/or life insurance. If you’ve landed on this Pacific Prime Hong Kong article, then chances are you’re not clear on what the two terms mean and what the differences between them are, nor will you have context for the aforementioned statements. Arm yourself with knowledge today so that you can make prudent and financially-savvy decisions.
What is health insurance?
A health insurance plan is designed to cover medical expenses incurred owing to illnesses and/or accidents. Those who secure the health insurance plan (known as ‘policyholders’) from an insurance provider make monthly or annual payments (known as ‘insurance premiums’). While they are insured, the policyholder can have their medical costs borne by the insurance provider.
But, it’s not always as simple as that. Oftentimes, the insurance provider will add a ‘deductible’. Essentially, this is the amount that the policyholder will have to pay out of pocket before the insurance provider starts paying. What’s more, the plan may have ‘exclusions’. These are things that the insurance provider will not cover – say for instance, ‘pre-existing conditions’ or health conditions that the policyholder has before securing the health insurance plan.
Check out this video on the 8 most common health insurance exclusions:
Types of health insurance coverage:
As a minimum, health insurance plans offer inpatient coverage. It covers the policyholder if they are admitted overnight at a hospital. On the other hand, outpatient insurance covers the policyholder if they don’t need to be admitted overnight at a hospital. In addition to outpatient insurance, there are many other ‘riders’ or optional extras that policyholders can attach to their health insurance plan. For example, dental, vision, and maternity coverage.
Read more about inpatient vs. outpatient insurance or check out this video on the same topic:
What is life insurance?
Unlike a health insurance plan, a life insurance plan doesn’t cover medical expenses owing to illnesses and/or accidents. In exchange for the premiums that the policyholder pays, the insurance provider will pay a lump sum amount (known as ‘death benefit’) to the policyholder’s beneficiaries or the person(s) designated by the policyholder when the policyholder dies. The beneficiaries can use the money for whatever purpose they choose:
- Paying everyday bills
- Paying a mortgage
- Paying for a child to go through college
- Etc.
Types of life insurance coverage:
Not only is term life insurance the most affordable type of life insurance, but it is also the most popular type of life insurance sold. It provides coverage for a certain amount of time. Typical choices are policy lengths of 10, 15, 20, 25 or 30 years. If the policyholder passes away within the term of their policy, their beneficiaries can make a claim and receive the death benefit money.
Note: It may be possible to renew the coverage in increments of one year (known as guaranteed renewability) once the term of the policy expires.
There is also permanent life insurance, which provides lifelong coverage. It’s typically more expensive than term life insurance because it can last for the duration of one’s entire life. In addition to paying a death benefit to beneficiaries, permanent life insurance usually also builds cash value. The cash value earns a fixed interest rate, and the policyholder can borrow against it. There are several varieties of permanent life insurance.
What is the difference between health insurance and life insurance?
To recap, here are the key differences between health insurance and life insurance:
| Health insurance | Life insurance | |
| What is it? | Insurer pays for policyholder’s healthcare and medical treatment | Insurer pays lump sum amount after the policyholder dies |
| Who benefits? | Policyholders can receive medical treatment paid for by the insurer, according to the terms and conditions of the policy. | Lump sum is paid to the beneficiary when the policyholder dies. Loans against the cash value are paid to the policyholder. |
| When is the payout? | Payout occurs when the insurer receives a claim. In many cases, the healthcare provider can also bill the insurer directly. | Payout occurs when the policyholder dies. Loans against cash value policies are paid out after the loan has been processed. |
| How much is the payout? | Payout is the cost of medical service up to the max benefit for each service, as agreed in the policy. The money is used for medical care. | Payout depends on the policy and the amount will be listed in the policy. The money can be used in any way. |
Dive into the world of insurance with Pacific Prime Hong Kong today!
While we’ve explored the basics of health and life insurance, there’s still so much more to uncover. As a global health insurance brokerage, Pacific Prime Hong Kong has a number of educational resources including guides, articles, videos, and more. Feel free to check them out. Alternatively, you can also consult us. Whether you’d just like to learn more or secure an insurance plan, you’re more than welcome to reach out to our highly-trained insurance advisors.
Rest assured, you’ll get impartial advice, a tailored plan comparison, and a no-obligation quote.
Contact us today!
With over 5 years of experience in the field, Suphanida spends the majority of her day synthesizing complex pieces of insurance-related information and translating this into easy-to-understand, engaging, and effective content across a variety of media such as articles, infographics, whitepapers, videos, and more.
Suphanida is also responsible for planning and publishing three whitepapers released annually by Pacific Prime: The State of Health Insurance Report, The Cost of Health Insurance Report, and The Global Employee Benefits Trends Report. Additionally, she handles the LinkedIn profiles of Pacific Prime’s Founder and CEO, as well as Global HR Lead.
Suphanida’s strengths lie in her strong research and analytical skills, which she has gained from her BA in Politics from the University of Warwick and Erasmus Mundus Joint MA in Journalism from Aarhus University and City, University of London.
Being of Thai-Indian origin and having lived, studied, and worked in Thailand, the UK, and Denmark, Suphanida also has a unique, multicultural perspective that helps her understand the struggles of expats and globetrotters.
Outside of work, she enjoys traveling to new places and immersing herself in different cultures.
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