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What is the difference between Health, Medical and Life Insurance (India) and Which one I should take my self and which one for my wife?

I want to take insurance for safety + tax saving purpose. What to do need suggestion.

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Health & Medical Insurance are same and cover the eventuality incase one gets ill and needs a major surgery/treatment/hospitalization.
Life Insurance on the other hand covers the eventuality of death, where the sum assured goes to the Nominee. The money would be handy for the dependents incase of your untimely death.

One needs to have both the covers. Medical and Life Insurance are covered under different sections for exemptions. For medical one can have upto INR 25,000 rebate for self and dependents. The Life Insurance is covered under 80c upto INR 1,00,000.

Do not buy a life insurance for tax saving, there are other instruments that would suffice your needs. Once typically needs to buy cover of 8 to 10 times you gross annual income. Term plans are the best plans and come very cheap.

As your wife is not working, only a Medical insurance/policy would be sufficient.

Edit: Based on Yishai comment.
One typically ignores Term policy for non-working spouse. However quite a few cases it may mean additional expenses, i.e. if children are small the need for additional house hold help, or the need of a vehicle / driver or may mean the surviving spouse need to cut-down on work time and reduced pay or any such needs have to be evaluated and based on it a term policy for spouse may well be advisable.

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  • Thanks for the answer. my main aim is to make the life of my wife secure. Saving tax is the secondary need. My wife currently doesn't work but just joined a new job. I think I should get the Medical Insurance for both but I'm confused about Life Insurance. Should I try to get for both or only for me? Suppose if I want to go for 10 Lakhs INR policy for myself then should i go for as much as possible money for me only or I should for 5-5 Lakhs policy for both.
    – metal-gear-solid
    Jul 4, 2011 at 16:48
  • As currently you are the primary earner, its important you get a life cover. You need to take cover for your wife only if you are dependent on her income. In such cases the split should be in proportion to the income. Remember to build at least 8-10 times of the annual income.
    – Dheer
    Jul 4, 2011 at 17:04
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    @metal-gear-solid: Yes thats right. if your annual income is 5 Lakhs, the cover as a thumb rule should be around Rs 40 to 50 Lakhs. There are other considerations like how much debt do you have, are there any other income streams that can generate revenue, etc. Essentially enough money so that your dependents can continue the current life style based on the interest income of the proceeds they would get.
    – Dheer
    Jul 5, 2011 at 7:19
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    It is a good answer, but I would add that if you have children, even if your wife stays and home, you should consider what it will cost you to raise those children without her there, and get life insurance for her to cover that amount.
    – Yishai
    Dec 9, 2011 at 15:34
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    @Dilip: Agree. It is not advisalbe to buy from them. I would stay away. That is the reason I do not prefer some of the Newer companies, although the premium is quite low and its very easy to take a policy ... one does not truely understand the fine prints ... to me having a policy from these firms is like not having a policy at all ...
    – Dheer
    Nov 22, 2012 at 4:49
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Have you considered taking a term insurance? It should be noted that Term Insurance are purely for Life Cover and there are no guaranteed returns. That means your nominee will receive quite a substantial amount in case of your death within the policy period. Otherwise the money is lost.

As per your comment, I believe you are looking into something which will make your family's life secure incase of your untimely death.

The advantage of taking a term insurance is the higher amount your nominee will receive in the case of your death. You can use Critical Illness rider, Permanent Disability rider etc to take care of the different situations.

For eg: A simple LIC policy with 25k yearly premium for a 30 year old person will give a cover of around 5 lakhs in India. You will get returns once the policy period is over.

Incase of term insurance, a 25k yearly premium will ensure a life cover of around 1 crore for a 30 year old person for 20-30 years. There are no returns incase the person is alive after the policy period is over unless some riders are applicable.

SBI Life Insurance also have high claim acceptance percentage. You can check the irda websitelink to find out the insurance company with high claim acceptance ratios and other statistics.

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  • +1 useful info thanks.SO in simple LIC policy will we get money back after a period of time?
    – metal-gear-solid
    Dec 9, 2011 at 16:36
  • yes, mostly after a period of 20-25 years. So it is useful as an investment and for tax saving. Tax exemptions are applicable in the case of term insurance also.
    – Techiegirl
    Dec 10, 2011 at 8:32
  • ok for better security. Term plan is best for peace of mind
    – metal-gear-solid
    Dec 10, 2011 at 8:33
  • Is term plan also for a time limit as you wrote "25k yearly premium will ensure a life cover of around 1 crore for a 30 year old person for 20-30 years" what is mean of "for 20-30 years"
    – metal-gear-solid
    Dec 10, 2011 at 8:34
  • yes, it is usually for 10,20,30 yrs. The maximum policy time will reduce when your age is higher, and your annual premium will be higher. For eg, an annual premium of 14k will cover a person of 26 yrs for 1 crore (life cover only) for 30 years. But a 30 year old person will need to pay much more for the same cover and period. Non-smoker/smoker also matters. If you are 60 year old, this kind of insurance will have a max period of 10 years since a cover for 20 years is not good for the insurance company. Then you may need to undergo health check up also for term insurance.
    – Techiegirl
    Dec 10, 2011 at 10:38
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I think health and life insurance policies are used for different purpose. Health insurance policy used to secure health and life insurance used to secure life.

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    This does not really answer the question about what they are.
    – user4127
    Nov 21, 2012 at 16:20
  • Welcome to Money.Stackexchange.com Jayesh. Can you improve this answer so it actually describes the functions of the different policies? As your answer stands it doesn't really contribute much...
    – C. Ross
    Nov 21, 2012 at 18:59

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