What is the difference between health and life insurance?

Both health and life insurance can seem complicated. We look at the differences  in benefits and the value of having the protection of both. 

What is health insurance?

Health Insurance is a personal insurance that helps cover the costs of medical and surgical care. The right health insurance product can protect you against a range of medical costs and surgical expenses. This might include emergency requirements – like stays in private hospitals, ambulance services and time spent in intensive care – or more everyday health expenses, like optical, dental or chiropractor appointments.

If you live in Australia, you’re likely to be benefiting from the Government funded Medicare system, meaning that many of your health costs are already accounted for. However, health insurance may provide you with benefits that are not covered and give you a wider range of health care options – sometimes resulting in faster treatment as a private patient.

Are health insurance and life insurance different?

Health insurance and life insurance can work together to protect you across a range of scenarios.

Health insurance can help cover the cost of treatments for specific health conditions, with payments most often going directly to the healthcare service for a specific operation or treatment etc.

With life insurance, payments are made directly to you, or to your nominated beneficiary. This means you get to choose how to spend your money and prioritise the expenses as you see fit taking into consideration paying off debts, loss of income, childcare fees or costs of rehabilitation and ongoing care.

Perhaps, confusingly life insurance is both the name of an individual product as well as the overarching term for a category of different types of life insurance, some of which don’t necessarily only pay out when you die. The types of life insurance that can include living benefits include Critical Illness, Total and Permanent Disability and Income Protection. Here’s a quick overview of what each of these are:

Critical Illness: In the event you’re diagnosed with a serious medical condition or illness- Critical illness cover can provide a lump sum payment that gives you the freedom to manage your expenses as you see fit. Major conditions include Heart attack, stroke, Malignant cancer and loss of limbs.

Income Protection: Income Protection replaces a portion of your income (usually 75%) if you are temporarily unable to work due to an illness or injury that has left you Totally Disabled or Partially Disabled. This is usually paid as a monthly benefit till you can return back to work or until your benefit period ends.

Total Permanent Disability (TPD): TPD insurance can provide a lump sum payment if you were to become permanently disabled due to accident or illness, and are unlikely to ever be able to work again.

An example of the way health insurance and different types of life insurance can work together is in the instance where an individual is diagnosed with cancer, and due to treatment and recovery, is unable to work for a number of months. In this circumstance, depending on your level of cover, health insurance could cover certain treatment costs, such as hospital stays or chemotherapy. While a lump sum critical illness pay out could help make up for the lost income and help cover family living expenses, or even be used to take the family on a holiday once recovered. It’s your choice how you would choose to use this lump sum payment. 


So, do you need both health and life insurance?

Clients ask this all the time and there may be situations that you are covered by Health insurance and may think you don’t require personal insurances, although consider the following:

  • Your family and how they would be impacted if your income wasn’t coming in anymore
  • How would debts be paid if you can no longer return to work
  • How will child-care expenses and private school fees be afforded
  • How will costs of a funeral or changes to the family home for rehabilitation be covered.

We want to ensure you’re fully protected, whatever life throws at you. Having both health and life insurance in place may be a great way of covering different eventualities.

Health insurance premium increases took place in April, so you may want to consider reviewing your health insurance and make sure you have the best policy for you.

Life insurance can also be funded through your superannuation benefits so as to not impact your direct cashflow. There will also be further tax deductions depending on how you hold your benefits.


If you would like to review your position and see what is best for you. Call our office on (02) 9188 1547 or email




Information published on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in this document is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a qualified adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances.

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Ronald Pratap

Principal Financial Planner at RP Wealth Management | Financial Planning l SMSF I Insurance l Property Advisory. Our purpose is to provide our clients with sound advice and direction to assist with their financial affairs and help them make the best choices in achieving what is important to them.


Level 2
351 Oran Park Drive
Oran Park N.S.W 2570

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