Life and Health Insurance. What’s the difference and why should I care about it?

We know what you’re thinking: “I’m in great health and I’m not that unlucky”. Well, even Superman’s got his weakness and your Kryptonite could be lurking around somewhere in the next few years. Not to scare you, but tackling illnesses and facing our mortality is inevitable, even if it’s taboo to talk about it. It’s always better to prepare for rainy days—not only for yourself but for the people who matter to you!

You’ve heard people talking about life and health insurance many times. But do you actually know what they are and what are their differences? 

What do you need to know about life insurance? 

To put it simply, life insurance is a form of financial protection. It’s a policy designed to prevent you or your family from financial loss in the event of your death or if you suffer from Total and Permanent Disability (TPD).

An event that results in your death or total and permanent disability can be financially distressing. For the former, funeral costs will now be on those you’ve left behind; with the latter, you may lose your ability to earn a living. During this difficult period of time, the insurance payout can help provide for your loved ones and yourself.

There are two main types of life insurance: Whole Life Insurance and Term Insurance.

Both whole life insurance and term insurance cover you for death, terminal illness and TPD.

With whole life insurance, you usually pay premiums for a specific duration (depending on the policy itself) to get life-long protection and part of your premiums is also invested to build up cash value. In the event of your death or TPD, your beneficiary will receive a payout. 

With term insurance, you pay premiums throughout the entire period of your coverage or term—hence the naming “term insurance”—which can be a specific number of years, or up to a certain age. Your loved ones will receive an insurance payout upon your death or TPD only if the event happens during the duration of the policy. Depending on the policy, you may choose to renew or convert the policy to whole life insurance, but that’s not always possible depending on the terms and conditions of the policy. Unlike whole life insurance, there is no cash value when a term insurance policy ends.

In general, there isn’t one that’s better than the other, but there are several differences between the policies. Whichever you choose will ultimately depend on your needs, personal situation, affordability and suitability of the policy.

How about health insurance?

Now that you’re familiar with life insurance, it’s time to look at health insurance.

Taking care of your family upon your death or TPD is crucial. But what about all the costs incurred from an illness or accident? That’s where health insurance comes into play.

Health insurance helps to pay for your expenses that arise out of medical events. Not only does it help you and your family deal with the cost of your medical treatment, certain types of health insurance also give you cash payouts while you’re recuperating to deal with expenses or income loss as a result of your illness or accident.

As with all policies, health insurance isn’t just one dimensional as different insurance cater to specific protection needs. But fret not, we’re here to break it down for you.

Three examples of insurance that fall under health insurance are Medishield plans, Critical Illness insurance, and Personal Accident insurance.

As long as you're a Singapore Citizen or Permanent Resident, you will be covered under MediShield Life which provides coverage for large hospital bills as well as specific outpatient treatment costs for your whole lifetime. On top of that, you can also purchase Integrated Shield plans from private insurers for enhanced benefits.

Critical Illness insurance can help provide financial support when you’re diagnosed with a serious illness, such as cancer. Many people might think the chances of getting cancer is low, but on average, one in four people may develop cancer in their lifetime. Recovery takes time and during such a challenging period, you might not be able to work or resume your daily activities as per normal. While you nurse yourself back to health, the cash payout from critical illness insurance can be used as financial support to bear the additional care costs (such as the cost of hiring a helper or rehabilitation costs) and the loss of income. 

Personal Accident insurance offers protection for accidental death, disability, injuries, or infectious diseases. While its coverage is limited, the payout can serve as a financial cushion should the unexpected happen.

Some think that critical illness and personal accident insurance are not essential, but they are actually important additions to your overall health insurance coverage as they cover events that are not included in Medishield Life or Integrated Shield plans.

But what’s the difference between life and health insurance?

You might be thinking, wait…Do I really need both life and health insurance? They seem to protect me against similar situations.

Well, life insurance provides you assurance in terms of coverage in the event of your death or TPD. On the other hand, if you’re diagnosed with a major illness or met with an accident, health insurance such as critical illness insurance and personal accident insurance respectively can provide financial relief from medical expenses necessary for your recovery, and a loss of income.

That’s why both health and life insurance are equally important to have as they protect different needs. Whether it’s about maintaining your quality of life during difficult situations or lifting the burden of medical costs, each insurance seeks to ensure that you are sufficiently covered when unforeseen situations arise. 

Okay but…Which should I get first? 

There are no hard and fast rules as to which insurance you should get first. It all depends on your current needs, budget and life stage. For instance, if you have a family that is dependent on you for income, you may want to purchase critical illness insurance to take care of costs that might incur from a major illness. If you are worried about outpatient expenses or loss of income in the case of an accident, personal accident insurance may be more of a priority.

With life insurance, you can be sure that you’ll be financially supported during unfortunate events such as death or TPD. Whole life insurance is a long-term commitment—if you start early, the portion of your premium that’s being invested will have a longer duration to accumulate cash value. However, if you’re only looking for pure protection without any cash value, a term insurance might be more suited for you. Choosing the right life insurance plan would definitely take some planning and consideration.

All this information might feel daunting, but we’re here to help you!

Knowing what falls under life insurance and health insurance is one thing, but knowing how much you should put into each type of insurance is another.

As with all things, it takes time to consider the type of insurance plans you need, especially when it concerns your life and health. What’s certain is that your future self will definitely thank you for being prepared when the unexpected happens. Discussing your concerns and needs with a financial consultant can also help you make more informed decisions to ensure that you are well-covered too.

Manulife’s life insurance and health insurance plans can help ensure peace of mind for you and your loved ones. Here’s to getting started and staying protected!