Key differences between life insurance and health insurance

What’s the difference between life and health insurance?

What is life insurance?

Life insurance pays out a lump sum to your chosen beneficiaries to help cover living costs, debts, and other financial obligations while you’re terminally ill or after your death. Your loved ones can also use the life cover benefit for income replacement, home loan payments, tertiary education, and other major expenses to set themselves up for a more secure future.

The best life insurance plans in New Zealand typically cover the following:

• Death benefit: If you pass away, your beneficiaries will receive the lump sum payout you elected at the time you purchased your policy. This benefit is especially important if you’re the family’s income earner or have dependants.
• Terminal illness benefit: This benefit is a feature of many life insurance plans, enabling the policyholder to claim all or a portion of the death benefit if diagnosed with a specified terminal illness or if they have a limited life expectancy, typically 12 months or less.
• Bereavement support benefit: To help cover funeral, cremation, and burial costs, beneficiaries can claim an advance payout of up to $25,000 from the life insurance policy.

What is private health cover?

Health insurance provides quick access to essential medical treatments without paying excessive private healthcare expenses.

There are two main types of health insurance: everyday health plans and comprehensive medical insurance. Everyday health plans cover day-to-day medical costs, such as GP visits, dental and optical care, prescriptions, and alternative treatments.

Comprehensive health insurance goes much deeper, offering financial support for private hospitalisation expenses, diagnostics, surgeries, and elective treatments. Some of the best plans include cover for non-Pharmac-funded medications, which can be prohibitively expensive without insurance. Policyholders can also bypass the lengthy waiting times experienced in public healthcare facilities.

When comparing comprehensive health insurance plans, look for products that cover the following:

• Surgical and non-surgical treatments: Comprehensive health insurance plans often cover the costs of both surgical and non-surgical treatments in private healthcare facilities. These include minor day surgeries as well as complex procedures requiring advanced medical expertise.
• Cancer care: Cancer treatment is an important focus area for many health insurance providers. These plans typically cover chemotherapy, radiotherapy, and immunotherapy.
• Hospital stay: Private hospitalisation is hugely expensive. Comprehensive insurance covers private hospital room charges, medications, hospital specialist consultations, and associated services, like diagnostic tests or post-operative care.
• Non-Pharmac medications: In New Zealand, certain high-cost life-saving or life-extending medications are not subsidised by Pharmac, meaning uninsured patients need to pay for these drugs and their administration out of their own pocket.
• Home care: Recovery doesn’t always end when a patient leaves the hospital. Many policies include cover for home care services, such as post-operative home nursing and physiotherapy.
• Overseas treatment: If a specific treatment is unavailable in New Zealand, some insurers offer cover for overseas medical care. This benefit means patients can access specialised services offered outside New Zealand, like advanced surgeries, rare procedures, or alternative cancer therapies.
• Additional services: While comprehensive health insurance focuses on expensive and high-priority medical needs, insurers also offer optional add-ons to address everyday health concerns. Common add-ons include:
  • GP and nurse consultations
  • Prescriptions
  • Dental, eye, and ear care
  • Specialist consultations.

Life insurance vs health insurance

Life insurance and health insurance differ in purpose, cover focus, and payout structure.

Purpose

• Life insurance provides your loved ones with financial security in the event of your death or terminal illness
• Health insurance promises faster access to medical services so you can recover and rehabilitate sooner, without the financial outlay, losses, and debts incurred due to high private medical bills.

Cover focus

• Life insurance protects your family’s future by providing a financial benefit upon your death. It also offers cover for terminal illnesses, with benefits paid out if the insured is diagnosed with a condition that leaves them with a life expectancy of 12 months or less.
• Comprehensive health insurance prioritises your health and wellbeing by covering private medical expenses, including private hospital stays, surgical and non-surgical treatments, cancer care, and non-Pharmac-funded drugs.

Payout structure

• Life insurance typically provides a lump sum benefit to your beneficiaries upon your death. For those diagnosed with a terminal illness, part or all of this lump sum can be advanced to help manage end-of-life expenses. A bereavement support benefit is also available, releasing a portion of the lump sum immediately after death to cover funeral costs and urgent expenses.
• Comprehensive health insurance pays for covered medical and hospital expenses up to specified limits. This structure ensures that policyholders have a cost-effective means to access private healthcare, including high-quality medical services, and specialised treatments.

Combining life and health insurance

Although life and health insurance fulfil different purposes, both should be integral to your financial planning. For greater peace of mind and the assurance that you and your dependants are better prepared for life’s uncertainties, consider the benefits of having health and life cover. It’s worth it.

Let Policywise help you!

Policywise is a 100% free service which tells you which health and life insurance provider best fits your needs. We offer fast, comprehensive, and easy-to-understand comparisons of all leading providers, and a simple summary clearly recommending which insurer is best for your situation.

Not all insurance policies are the same. Policywise can help you sort out the duds, avoid the lemons, understand the fine print and exclusions, and get the right insurance for you and your family.

We make the important decision of where to buy your insurance super easy. We’ll answer your questions, provide experienced advice, quotes, and comparisons, and manage all the back and forth throughout the application process. Taking out your cover through us means you'll have our lifetime support and claims advocacy, and we'll help you negotiate a positive outcome at claim time. We can also take care of lodging any claims on your behalf and back you up if the going gets tough.

Check out the reviews on our homepage for how other New Zealanders have found our service, because now is the time to get your health and life insurance sorted. Give your family or someone you love the most outstanding financial support possible. Book a 5-minute callback with Policywise today; our service is fast and free.

^{Disclaimer: This article is for general information only. Nothing in this blog or on this website is intended as medical, dietary, or financial advice. Although we aim to update our content regularly, you are advised to consult a Policywise adviser, health professional, or an appropriate specialist before acting on any information herein. They can factor in your personal circumstances or preferences and help guide your decision-making process.}