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.