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What’s the difference between life insurance and health insurance?

It’s easy to see why people might think that health and life insurance mean similar things. After all, the two terms are closely linked. However, they refer to completely different products which offer separate types of cover.

If you’re interested in either, understanding the difference is important so that you don’t take out the wrong type of policy. So, what exactly is the difference?

Life insurance

Life insurance provides a lump cash sum to your loved ones when you pass away. This can then be used for anything, although it is often designed to cover payments like mortgages or living expenses due to lost income.

When you go to take out a policy, there are two main considerations. The first of these is how long you would like your term to be, which can range from a few years the rest of your life. The second will be the level of cover you want, with some people requiring far higher payouts to their beneficiaries than others. Both of these will impact your premiums, with longer, higher value policies costing more.

Unlike other types of insurance, you can stop paying and cancel whenever you want. As soon as you do this, however, your cover ends.

Health insurance

Whereas life insurance pays out when you die, health insurance pays out when you're alive.

It provides specialist healthcare services for a wide range of different situations. This includes access to private hospitals, treatments and drugs that might not be available via the NHS and consultation services. It can also cover costs for dental procedures, although some providers require a separate policy for this.

Generally speaking, it also means that you are able to get seen quicker, which can be an appealing option considering the NHS waiting lists for certain types of treatment. 

Can you have both?

There is absolutely nothing stopping you from taking out both life and health insurance. In fact, some providers will encourage it and offer discounted rates for a bundled package. This is because it’s in an insurer's best interest to keep you from harm, and private health care is one of the best ways to do this.

Related guides

Pension Term Assurance

Until the end of 2006, pension term assurance was available as a form of life insurance that could be bought as part of a pension plan complete with the associated tax breaks.While this kind of policy is no longer available to new customers, those with such policies active are still entitled to continue them, and to enjoy the tax advantages they come with.

How life insurance for over 50s can help your family

Anover 50s life insurance policy will provide a guaranteed pay-out of a few thousand pounds to your loved ones when you die.While more traditional term and whole of life insurance policies can offer very large sums, or even monthly income, to support your survivors, the pay-outs from over 50s policies are more modest. They won’t replace your income or substitute for an inheritance, but they can cover your funeral costs, pay off debts, or provide a small gift to your loved ones.Let’s take a look at some of the many ways an over 50s life insurance policy can help your family and loved ones:

Gifting Money to Children and Grandchildren Explained

While most people plan on gifting money to children and grandchildren after they die, increasing numbers aren’t waiting to pass on their wealth. In fact, according to a recent study by sunlife.co.uk 25% of over-50s have given substantial cash gifts to family members in the last five years.These early inheritances - averaging £20,000 - are given to commemorate special occasions, cover education and expenses, and, overwhelmingly, to help the recipients purchase homes. As house prices have risen, getting on the property ladder has become harder.For many people, gifting money while they’re living is a means of avoiding some inheritance tax. This is levied at 40% on the value of an estate over £325,000. But gifts can also be taxable, and you’ll have to be savvy to avoid paying unnecessary taxes when bestowing money on your loved ones.