What’s the Difference Between Life Insurance and Health Insurance?

Article image.

Life insurance and health insurance may sound similar, but they offer two different types of coverage. Both can protect your finances in distinct ways. Being intentional about the policies you choose can help safeguard your future.

Life Insurance vs. Health Insurance
Life InsuranceHealth Insurance
PurposeTo provide a death benefit for your loved ones after you're goneTo reduce your out-of-pocket medical costs and make health care more affordable
AvailabilityPurchase individually; some employers offer it as a benefitMany employers offer it as a benefit; can be purchased individually
Benefit typeDeath benefit to beneficiaries; some accrue cash value you can accessAllows you to seek covered medical care
Choosing a policyMany types, term lengths and benefit amounts are availableYou may not have a choice in carriers; you may be able to choose the level of coverage, deductible, premium and more

What Is Life Insurance?

If you purchase a life insurance policy and continue paying your premiums, your beneficiaries will be entitled to a death benefit when you pass away. That can provide them with much-needed financial relief during a very difficult time, especially if they rely on your income.

Some life insurance policies also accumulate a cash value that you can draw on during your lifetime.

How much you'll pay for life insurance will depend on the type of policy you purchase as well as your:

  • Coverage level
  • Age and gender
  • Health and family medical history
  • Lifestyle and job

Types of Life Insurance

There are two main types of life insurance. Both can provide your loved ones with a cash payout upon your death, but there are some key distinctions to be aware of.

Term Life InsurancePermanent Life Insurance
How long does coverage last?For a set period of time (usually 20 years)Typically lasts your entire life
Does it accumulate a cash value?NoYes
How much does it cost?Average of $30 per month for a man, $23 for a woman*Average of $472 per month for a man, $408 for a woman**

*Source: Policygenius, 2024. Based on a 20-year, $500,000 life insurance policy, assuming the policyholder is in generally good health.
**Source: Policygenius, 2024. Based on a $500,000 whole life policy, assuming the policyholder is in generally good health.

Benefits of Life Insurance

Life insurance comes with attractive benefits for those who maintain an active policy. That includes:

  • Financial protection for your loved ones: Your policy's death benefit can prevent additional stress for grieving family members. Knowing that your loved ones will be financially taken care of after you're gone can provide peace of mind.
  • Support with estate planning: Your death benefit can also be used to cover outstanding debts and funeral expenses. In this way, your life insurance policy can be a vital estate planning tool.
  • Ability to build a cash safety net: If you opt for permanent life insurance, your policy will accumulate an interest-earning cash value that grows over time. You can draw on these funds during your life as needed. That can help you cover everything from surprise expenses to retirement income.

What Is Health Insurance?

Health insurance is used during your lifetime to help reduce the cost of covered medical expenses. That typically includes:

  • Preventive care
  • Regular doctors' appointments
  • Emergency care
  • Prescriptions
  • Certain medical equipment
  • Surgical procedures

You'll pay a monthly premium to keep your policy active. From there, you can seek covered medical care. Below are some key health insurance terms to be aware of:

  • Deductible: The amount you'll have to pay out of pocket before your insurance kicks in their portion.
  • Copay: A set fee you may have to pay for certain types of medical care. You might have to pay a copay to visit a specialist or your primary care physician.
  • Coinsurance: The percentage of your medical costs that you're on the hook for paying. For example, if your plan has 30% coinsurance, your insurer will pay for 70% of the cost of your care.

Types of Health Insurance

When comparing health care plans, you'll probably notice that they fall into the following categories:

  • Health maintenance organization (HMO) plans: An HMO covers in-network providers, but you'll likely need a referral from your primary care physician to visit a specialist.
  • Preferred provider organization (PPO) plans: With a PPO health plan, you can visit any in-network specialist without needing a referral from your primary care doctor. You also have the option to visit out-of-network health providers, but the cost will generally be higher.
  • Exclusive provider organization (EPO) plans: Your insurer will cover preferred in-network providers, and you may or may not need a referral to see a specialist.

You may also be eligible for health insurance programs at the federal or state level, such as Medicaid and Children's Health Insurance Program (CHIP). Those who are 65 and older can also explore Medicare.

Benefits of Health Insurance

Let's look at the primary reasons to consider buying health insurance.

  • Coverage for medical costs: Medical services can be very expensive, especially if you have a chronic condition or require emergency care. Having health insurance can reduce your out-of-pocket costs and make health care more affordable.
  • Greater access to care and services: Health insurance typically covers preventive care, as well as regular doctors' visits, specialist appointments and medications. Some plans also offer mental health coverage. Going uninsured might financially prevent you from getting the care you need, which could affect your health.
  • Potential access to a health savings account (HSA): If you have a high-deductible health plan, you could set aside pre-tax dollars in an HSA. You'll enjoy tax-free withdrawals if you use HSA funds to cover qualified medical costs.

Learn more: Are Medical Expenses Tax Deductible?

Do I Need Both Life Insurance and Health Insurance?

It's impossible to predict what the future holds, and having the right insurance policies in place can safeguard your finances and ensure that you're adequately covered. Lacking health insurance could cut you off from potentially life-saving health care—or derail your finances if you accumulate medical debt.

Meanwhile, you might consider a life insurance policy if you have people in your life who depend on your income. That could be a spouse, child or other family member or dependent. It can also go a long way when it comes to legacy planning, allowing you to leave money to charitable organizations that are meaningful to you.

Learn more: What Happens to Medical Debt When You Die?

How to Get Life Insurance and Health Insurance

The process for securing coverage will depend on the type of insurance you're buying. Here's a general guide to get you started.

Life Insurance

You may be able to purchase low-cost life insurance through your employer. Some might even offer it for free. This could be a great option, but you'll want to read over your policy carefully to make sure you have enough coverage. If not, you can purchase an additional policy on your own through an insurance company.

After determining how much life insurance you need, you can compare multiple quotes, submit an application and complete a phone interview. In some cases, a medical exam might also be required.

Health Insurance

Many employers offer group health insurance plans, which could be more affordable than purchasing a health plan on your own—especially if you need family coverage. But if you don't have access to an employer-sponsored plan, you can visit Healthcare.gov to compare different options and purchase a policy. You'll want to pay attention to:

  • Premium amounts
  • Deductibles
  • Coinsurance and copays
  • Covered services and providers
  • Whether the total costs are aligned with your budget

Once you're locked into your health insurance policy, you'll have the option to modify your plan every year during the open enrollment period.

Frequently Asked Questions

You may be able to deduct your health insurance premiums if you're self-employed, whether you itemize your deductions or not. But this won't be an option during months that you or your spouse were eligible for an employer-sponsored health plan.

When a term life insurance policy expires, your coverage will end at that time. At this point, you can consider renewing your policy or converting it to a permanent life insurance policy. Alternatively, you could shop around and purchase an entirely new policy, depending on your needs.

The Bottom Line

For many people, deciding between life insurance and health insurance isn't an either/or situation. Both can be used to round out your financial plan and provide the coverage you need. What matters most is choosing policies that are aligned with your needs and budget.

Check your life insurance price for free

Get your term life insurance quote online in minutes.

See your price
Promo icon.

About the author

Marianne Hayes is a longtime freelance writer who's been covering personal finance for nearly a decade. She specializes in everything from debt management and budgeting to investing and saving. Marianne has written for CNBC, Redbook, Cosmopolitan, Good Housekeeping and more.

Read more from Marianne

Explore more topics

Share article

Experian's Diversity logo.

Experian’s Inclusion and BelongingLearn more how Experian is committed

Download from the Apple App Store.Get it on Google Play.