Health Insurance or Life Insurance – Which to buy first?

Life vs Health insurance. Both are important for most people. So its actually not about health insurance vs life insurance. Rather it’s about life insurance AND health insurance. And sooner or later, one should have both these insurances in one’s insurance portfolio.

I got a mail from a reader about which is more important and which should be bought first if one doesn’t have all the money needed to buy them both at once? So for this reader, it was a question of term insurance vs health insurance.

First of all, there is no one right answer here.

  • Can you die tomorrow? Yes
  • Can you or family members get hospitalized tomorrow? Yes
  • Can you not die for the next 30 years? Yes
  • Can you or family members remain healthy and avoid hospitalization for the next 20 years? Yes

So the deciding factor here is luck. And you can’t do anything about it. Irrespective of what worries you in which to buy first health insurance or life insurance, you just cannot change your fate.

You may choose one of the two, let’s say life insurance today and meet with an accident where you get hospitalized next week. So no health cover to pay bills. Unlucky you!

Or you may choose health insurance today and end up dying next week. So no money to help your family after you. Tragedy no doubt!

Health and life insurance combined, both are important. And if you are picking one above the other (even if it is for just some time), then you are open to certain risks.

Your choice should be governed by your own unique situation, availability of employer-provided health covers, money and your better judgement.

So if your employer provides you with health cover of Rs 3 lac and life cover of Rs 15 lac, you can be sure that a major part of hospital bills (if any) will be covered in the Rs 3 lac cover. But Rs 15 lac might not be enough for your family after your death.

So in that case, you can first buy a large term cover of say Rs 1 crore and then maybe next month, buy a health insurance policy.

Or go for a top-up health policy which kicks in only when the threshold limit is exhausted. So if your employer gives you Rs 3 lac cover, you can buy a top-up policy for Rs 10 lac with Rs 3 lac kick-in limit. Any bills above Rs 3 lacs and upto Rs 10 lac will be paid by the top-up policy. Anything below Rs 3 lac will be taken care of by your employer’s coverage.

This is a cheaper and an elegant solution if you have money constraints.

And in any case, there are family members, friends and colleagues, (plus credit cards) who can pitch in in case of hospitalization. So that is another point to make note of.

But frankly, I don’t like this argument of not having enough money to purchase both term life insurance plan and a health insurance plan.

There is always money for things if you really look for. And you can buy both health insurance and life insurance combined. How?

You can cut down on your unnecessary spendings for just a couple of months and you will have the money. Or, just for one year, don’t put money unnecessarily into your tax-saving efforts and instead, buy these two policies first. For next year, start a recurring deposit and save money for premium payments. Ex – If both life + health insurance cost Rs 24,000 premium annually, simply start an RD of Rs 2000 and accumulate money for next year’s premiums. That way, there won’t be any last-minute burden on you.

I know the initial discussion was about health insurance vs term insurance. But again, both are very important unless you are very rich.

I am sure you already know the difference between health insurance and term insurance. Former pays for your hospitalization bills and latter pay lumpsum to your nominees in case of your death.

So it’s not about health insurance or life insurance. And why should it be? Why would you want to compromise at all? Look around. There is always some money to be found for important things, like buying life insurance and health insurance together.

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