Life vs. Health Insurance: What’s the Difference & Which One Should You Buy?

While both life and health insurance are important, understanding the differences between the two can help you determine which one suits your immediate needs best. Life insurance covers your death and gives money, called a death benefit, to your loved ones. On the other hand, health insurance can help pay for your and your loved ones’ medical expenses.

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Last Updated: 11/19/2022
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There is no denying the importance of both health and life insurance — but when it comes to necessity, health insurance should be your top priority. Health insurance can help you pay for medical services, including routine, special or emergency care, prescription drugs and more. In other words, it pays for expenses while you are alive. Conversely, life insurance gives your loved ones a lump sum to help pay off any debts or expenses in the event of your passing.

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Key Takeaways

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Life insurance gives your beneficiaries a lump sum to help support their finances after your death.

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Health insurance pays for your medical costs, such as routine care, prescription drugs, emergency care, specialty care and more.

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Between health and life insurance, health insurance is more important to have first as it can help pay for medical expenses while you are alive.

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What Is the Difference Between Life & Health Insurance?

Understanding the differences between life insurance and health insurance can help you discover which one is best for your needs. After all, what’s best for you will depend on where you are in life, what type of benefit you’re looking for and more.

Life vs. Health Insurance

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Life Insurance
  • Life insurance covers the death of the policyholder, enabling you to leave a lump sum, called the death benefit, in the event of your demise.
  • The death benefit is given to the beneficiaries you designate, which are often members of your family or a loved one.
  • Life insurance can suit everyone, particularly those with a spouse, kids or family members who will need financial support after their passing.
  • Life insurance is only available from private companies.
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Health Insurance
  • Health insurance helps pay for preventive services and other medical care, whether due to an accident, a disease or a health issue.
  • When receiving care, policyholders must pay out-of-pocket costs — such as a deductible, copays and co-insurance — before the insurer takes over the rest of the costs.
  • Health insurance is necessary for everyone at any age to help manage the costs of medical care.
  • The government offers health insurance through Medicaid and Medicare, but coverage can also be purchased from private companies through the Health Insurance Marketplace.

Overall, life and health insurance differ in their purpose. Life insurance is primarily intended to ensure the financial security of your beneficiaries after your passing, while health insurance is meant for you.

For instance, if you get into an accident, health insurance can help you pay for any medical costs you incur. However, you will have to pay a few out-of-pocket fees before your insurer takes over most of the medical costs. On the other hand, if you pass away, your family will simply need to file a claim with your insurer, and after the insurer processes it, they will be given a death benefit to help take care of any expenses they may have.

Coverage Comparison: Life Insurance vs. Health Insurance

Get an understanding of the coverage differences between life insurance and health insurance and figure out which one is right for you.

Coverage Differences Between Life Insurance and Health Insurance
  • Coverage For
    Life Insurance
    Health Insurance
  • Ambulatory Patient Services

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  • Emergency Services

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  • Hospitalization

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  • Laboratory Services

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  • Preventive & Wellness Services

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  • Pediatric Services

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  • Prescription Drugs

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  • Accidental Death & Dismemberment

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  • Natural Death

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While it may seem like life insurance covers less, remember that the purpose between health insurance and life insurance differs. Additionally, some life insurance types, such as whole life insurance and universal life insurance, can include a cash value component — something not found in health insurance.

This cash value component can serve as a form of savings or investment, as a portion of your monthly premium will be set aside to be invested by the company. You can typically withdraw this after a certain period or even have it included in your death benefit if you pass away before being able to withdraw it.

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Life and health insurance offer two very different coverages — but both are still essential. Life insurance is necessary if you have family members who are dependent on your income. This frees your family from financial worries after your passing, as it can be used to pay off a mortgage, for a college education or for other costs you would no longer be able to cover. On the other hand, health insurance is indispensable if you often face expensive medical costs or want to protect yourself against the likelihood of medical expenses.

Should You Buy Life or Health Insurance?

Life insurance takes care of your beneficiaries’ finances after your passing, while health insurance secures your finances in case of an accident or medical emergency. While both are essential, health insurance should be your priority if you are wondering which one to get first. This can let you navigate life with fewer worries, as you can get routine checkups and emergency care as needed without too much financial strain.

Generally, health insurance should come first as it can benefit you while you are still alive. Life insurance, though important, is mainly meant for the people you leave behind after your death.

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Whether you’re looking for the best health insurance companies or the best life insurance providers, MoneyGeek has analyzed companies around the country to find the ones that balance cost and customer service.

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Frequently Asked Questions

While it can be confusing at first, understanding the difference between life insurance and health insurance is essential to ensure you buy what you need. A review of the most commonly asked questions about health insurance vs. life insurance may be helpful.

About the Author


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Mark Fitzpatrick is a senior content manager with MoneyGeek specializing in insurance. Mark has years of experience analyzing the insurance market and creating original research and content. He graduated from Boston College with a Bachelor of Arts and Johns Hopkins University with a Master of Arts.