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


Enter your ZIP code to get started

Shield

Free. Simple. Secure.

Updated: May 22, 2024

Advertising & Editorial Disclosure

Understanding the differences between life and health insurance is key to making informed decisions about your financial security. Both play significant roles in a comprehensive financial plan, serving different purposes. Knowing which one to prioritize depends on your personal circumstances, financial goals and life stage.

Generally, when it comes to necessity, health insurance should be your top priority. It can help 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.

Key Takeaways

coins icon

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

firstAidKit icon

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

heartWithPlus icon

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.

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. 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

death icon
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.
heartWithPlus icon
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

denySign
checkSign

Emergency Services

denySign
checkSign

Hospitalization

denySign
checkSign

Laboratory Services

denySign
checkSign

Preventive & Wellness Services

denySign
checkSign

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.

Life vs. Health Insurance: Pros and Cons

Both life and health insurance come with unique benefits and challenges. Weighing these pros and cons helps in making informed decisions that align with your individual needs and circumstances.

Life Insurance: Pros and Cons

checkSign icon
Pros
  • Financial Security: Ensures your family's financial stability after your demise
  • Debt Coverage: Helps in settling debts, reducing financial burdens on your family
  • Estate Planning: Aids in efficient asset distribution to beneficiaries
denySign icon
Cons
  • Cost: Premiums can be high, especially for permanent life insurance
  • Policy Limitations: Certain policies may have restrictive terms
  • Possible Inflexibility: Term life insurance, which is typically the cheapest type, lacks cash value if outlived
Health Insurance: Pros and Cons

checkSign icon
Pros
  • Cost Management: Helps manage high medical costs
  • Preventive Care: Includes coverage for essential preventive services
  • Financial Protection: Shields from unexpected medical emergencies
denySign icon
Cons
  • Possibility of Having Limited Choice: HMOs may restrict healthcare provider options
  • Out-of-Pocket Costs: Deductibles and co-pays can accumulate
  • Coverage Scope: Some plans may have limited coverage for certain medical services or conditions
mglogo icon
MONEYGEEK EXPERT TIP

Life and health insurance offer two very different coverages — but both are still important. 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, because 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.

Important Considerations When Choosing Between Life vs. Health Insurance

When selecting between life and health insurance, evaluate various factors that impact your specific needs and financial situation. Each factor plays a role in determining the appropriate coverage for you, ensuring both immediate and long-term protection.

    heartWithPlus icon

    Current Health Status

    Assess any ongoing medical conditions or potential health risks, because they directly influence your health insurance needs. MoneyGeek analyzed what states are preparing to get healthy in the new year.

    family icon

    Financial Dependents

    If others rely on your income, life insurance becomes more important to secure their future.

    seniors icon

    Age and Life Stage

    Different stages of life call for different insurance priorities; younger individuals might prioritize health insurance, while older individuals might focus on life insurance.

    money2 icon

    Budget

    Determine your premium affordability, balancing between comprehensive coverage and financial constraints.

Choosing between life and health insurance doesn't have to be an either/or situation. You can integrate both into your financial strategy to ensure comprehensive coverage that aligns with your financial goals.

mglogo icon
MONEYGEEK EXPERT TIP

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.

Compare Life Insurance Rates

Ensure you're getting the best rate for your life insurance. Compare quotes from the top insurance companies.

FAQ About Life vs. Health Insurance

Understand the difference between life insurance and health insurance to ensure you buy what you need. A review of the most commonly asked questions about health insurance vs. life insurance may be helpful.

What is the difference between life and health insurance?
Should you buy life or health insurance?

About Mark Fitzpatrick


Mark Fitzpatrick headshot

Mark Fitzpatrick has analyzed the property and casualty insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. Currently, he leads P&C insurance content production at MoneyGeek. Fitzpatrick has been quoted in several insurance-related publications, including CNBC, NBC News and Mashable.

Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.