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In your professional life, you may have aspired to achieve various goals. You work hard and earn and make sure your life is worthwhile. You look to fulfil all the goals you thought of and see your family members achieve their investment goals, too.
But life is uncertain. What if you were the only earner and lost your life suddenly? In such a case, your family would get into a financial crisis. All that they have thought comes to a halt.
To make sure that the goals and dreams of your family members are achieved, life insurance is necessary.
Key Takeaways
Prepaid insurance involves paying premiums in advance, ensuring uninterrupted coverage while being recorded as one of the current assets on the balance sheet.
Prepaying insurance helps with budgeting, offers potential discounts, and provides tax benefits under Section 80C, allowing deductions up to ₹1.5 lakh annually.
While prepaid insurance improves financial transparency, it requires an upfront payment, reducing liquidity for businesses and individuals.
Prepaid insurance limits policy adjustments, and policyholders may miss out on new features or reduced premiums introduced by insurers later.
Unlike prepaid insurance, accrued insurance is recorded as a liability, covering expenses before payment is made, impacting financial planning differently.
What is a Life Insurance Policy?
Life insurance covers your life and provides financial assistance to your family members after you are not there with them. The policy will provide you with lump sum money to your dependents in the event of your death.
In return for this coverage, you are required to pay small amounts regularly known as premiums. Without payment of premiums, your policy cannot be active.
Life insurance includes various products such as ULIPs, Savings plans, Term plans, etc.
Canara HSBC Life Insurance offers the best in the market life insurance products. Some of the products are given below:
Guaranteed Savings Plan: Guaranteed Savings Plan provides you life cover as well as builds a habit to save.
This plan includes guaranteed benefits payable at the time of maturity. This means that you will receive a predictable amount. Your principal is safe. Both these plans are eligible for:
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What is a Health Insurance?
Health insurance proposes to cover full or part of your expenses that arise from illnesses in exchange for regular premium payments.
As the medical costs are rising with each passing year, the importance of having a health insurance plan for you and your family cannot be neglected.
There are two types of health insurance:
Mediclaim
Critical Illness plan
What is a Term Insurance?
Term insurance is a type of life insurance that offers you life coverage for a specific period or a ‘term’. It is the simplest and most affordable form of insurance.
The term for which you can take a policy can range from 5-30 years.
You select the term for your choice and pay the premiums during the term
If you die during your policy term, your family will get the sum assured agreed by you at the time of purchase.
However, if you survive the policy term, you are not liable to receive any benefit on maturity.
Some plans such as iSelect Smart360 Term Plan from Canara HSBC life insurance offers you a return of premium option. You will get the sum you have paid towards premiums back if you survive the policy term.
Difference Between Term Insurance & Life Insurance
Though life insurance and term insurance work towards the same purpose, both the policies have certain differences as well.
The primary difference lies in the duration of plans. A term plan offers you protection for a specific duration only.
On the other hand, Life insurance can give you coverage for a longer time. Plans provide you coverage up to 100 years if you opt for the century option.
Term insurance offers you death benefits. Life insurance provides you with death benefits as well as maturity benefits. However, the term insurance’s death benefit is significantly higher.
Premiums of term insurance are much lower than the premium of life insurance plans.
The maturity benefit of life insurance is free from taxes.
Life Insurance vs Health Insurance vs Term Insurance
Here are the differences between these 3 most popular types of insurances.
BASIS
LIFE INSURANCE
HEALTH INSURANCE
TERM INSURANCE
Meaning
Type of insurance that provides for life
Type of insurance which covers expenses that arise from hospitalization
Insurance that provides life coverage till the term chosen.
Plan Duration
Plans range from 5-30 years. Certain plans offer coverage up to 100 years.
Shorter duration. Ranges from 5-10 years
Ranges from 5-40 years.
Cash Value
These policies build a cash value
No cash value
No cash value
Premiums
Premiums are higher as compared to term insurance.
Premiums are moderate. They increase with age.
Premiums are affordable
Death benefit
The death benefit is provided to the family in case you die during the policy.
Health insurance includes no death benefit.
Yes, the death benefit is provided to your family if you die within the policy term.
Maturity Benefit
Maturity benefit is received after the policy term is over provided the premiums are paid.
Provides cover for medical emergencies (hospitalization expenses) till the policy is active.
No benefit on maturity. Return of premiums available in some plans
Bonuses
Bonus added for long term and regular investors
Sum assured increment may happen for claim-free years
NA
Tax benefits on premiums paid
Tax deductions available u/s 80C and 10(10)D on the death benefit
Tax deductions available u/s 80D
Tax deductions available u/s 80C and 10(10)D on the death benefit
Tax benefits on the maturity value
Tax deductions available u/s 10(10)D in case of ULIP plans bought on/after 1 Feb 2021.
No such benefit is available
No such benefit is available
Thus, you should use the life insurance plans for specific life goals like retirement, child’s education etc. On the other hand health and term insurance plans should protect your family’s future financially.
Why and When Should You Opt for These Insurance Plans?
Choosing the proper insurance policy is based on your future security needs, financial goals, and obligations. That is why and when you need to select each type of insurance:
Life Insurance:
Life insurance is ideal if your dependents live on your paycheck. It provides financial security for your loved ones when you are gone.
It also supports long-term money planning as there are life insurance policies that include savings and investments.
If you are looking for protection as well as saving money, products like the Guaranteed Savings Plan are your best bet.
What separates life insurance and term insurance from health insurance is that life insurance can have investment components, term insurance is purely for protection, and health insurance is to pay for health bills.
Did You Know?
Life insurance policies can be tailored with "riders," enabling policyholders to access benefits before death.
Source: Investopedia
Term Insurance:
If your top priority is safeguarding your family's financial health at an affordable price, term insurance is the best option.
You can opt for it if you have financial responsibilities like a mortgage, school fees, or any other financial responsibilities.
Term insurance provides low-cost high coverage and is most essential for single breadwinners.
One of the most important factors in term insurance vs life insurance vs health insurance is that term insurance offers risk coverage only without any maturity benefits, while life insurance can offer a savings component.
Health Insurance:
As medical costs rise, health insurance ensures that you and your loved ones will not incur financial losses because of medical emergencies.
One ought to purchase a health insurance cover early in life when they are still affordable.
Whether you take Mediclaim or a Critical Illness Plan, medical cover can avoid hospitalisation and treatment out-of-pocket costs.
The difference between term insurance and life insurance and health insurance is that health insurance is solely about paying medical bills, but life and term insurance covers you financially for other people's sake.
In coming to an understanding of how the words insurance vs life insurance vs health insurance vary in meaning, you can make informed choices based on your requirements.
Final Thoughts
A life insurance policy is a crucial financial tool that provides security and peace of mind for you and your loved ones. Whether it is a Term Insurance Plan for pure protection, a Guaranteed Savings Plan for future financial stability, or health Insurance To cover medical expenses, choosing the right plan at the right time ensures long-term financial well-being.
By investing in life and health insurance early, you can secure your family’s future, enjoy tax benefits, and protect yourself against unexpected financial burdens. Life is unpredictable, but with the right insurance policy, you can stay prepared for any uncertainties while ensuring financial stability for yourself and your loved ones.
Glossary
Premium: Regular payment by the policyholder to keep the policy active; failure to do so can lead to the policy lapse.
Sum Assured: The amount assured is paid to the nominee in case of death or policy maturity, according to policy conditions.
ULIP: A life insurance product that integrates market-linked investment along with life protection in one policy.
Critical Illness Plan: Pays a lump sum on diagnosis of major illnesses like cancer, stroke, or heart attack.
Maturity Benefit: The benefit paid at the policy term close in savings-oriented life insurance policies.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
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