Many people are often confused about health insurance and life insurance. In simple terms, a health insurance prevents you from paying a large bill by covering full or a part of your medical expenses. A life insurance, on the other hand, gives to your beneficiary the entire face value of the policy as lump sum if you (the insured) die.

There are two kinds of life insurance: whole life and term life. Term life insurance is less expensive than whole life insurance. You can buy a term life insurance policy for as short as one year to a maximum of 30 years. If you have a term life insurance, your beneficiary only gets the money if you die. Most people choose to go with a term life insurance policy when they become older.

Whole life insurance, on the other hand, employs is a mix of life insurance policy and an investment plan. The premium that you pay is partly put into the life policy and the rest is put into the investment mechanism of your choice. You can choose to invest your money in a mutual fund, money market instrument, stocks, bonds and others. With a whole life insurance policy, you, the holder, is “forced” to save money, which you can eventually use when you retire. However, there are a lot of fees and commissions involved in whole life insurance. When you take these fees into account, a whole life insurance may turn out to be expensive for an individual.

Although a life insurance policy and health insurance policy are very much different from each other, both depend largely on the age and health of an individual. The younger you are, the less monthly premium you have to pay. If you are older and have poor health, you would end up paying high premiums.

So which insurance policy should you choose? Unfortunately, there is no black and white answer to this. If you are an employee and your employer offers both a health insurance and a low face value life insurance policy, take advantage and get both. However, if your employer only offers one and not the other, or you are self-employed, your choice of insurance policy will depend on your monthly spending power and overall financial situation.

Although expensive, it may be better to opt for health insurance coverage to avoid having to pay a hefty medical bill when you go down with an illness or have an accident. However, if you are not medically insured and have huge medical bills to be paid, a term life insurance policy that has a face value sufficient enough to pay off your bills will be helpful. You can designate your spouse as your beneficiary and he or she will not have to bear the burden of paying off the debt since your policy amount will be take care of your medical bills.