Life Insurance vs. Health Insurance

By January 30, 2024 Advisor, Blog, Consumer, News
Woman comparing Life Insurance vs Health Insurance

You might be doing everything right for a healthy life – eating well, working out regularly, managing stress, and building strong social ties. It’s great that you’re taking such good care of yourself.

But life, in all its unpredictability, can surprise us with accidents or sudden illnesses, and ultimately, we all must face life’s final chapter.

This inescapable reality underscores the vital importance of insurance coverage. But you might be wondering, what is the purpose of life insurance versus health insurance? How do I choose between life insurance vs. health insurance, or should I have both? These are different products. Let’s take a deep dive and learn more about life insurance vs. health insurance.


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The Purposes of Life Insurance and Health Insurance

There is a marked difference between life and health insurance, each fulfilling entirely different needs. It can be good to have comprehensive coverage and to carry both life insurance and health insurance, if you can afford it.

While Canada has a universal healthcare system, it doesn’t pay for everything. Health insurance can supplement public healthcare by covering extra costs such as private rooms and prescription drugs. For terminal illnesses, it might cover treatments not fully funded by the public system. However, health insurance doesn’t offer financial support to your loved ones after death.

Conversely, life insurance helps provide financial security to your beneficiaries after your passing, and can assist them in covering final expenses and debts associated with your estate. Some policies include living benefits or accelerated death benefit riders, allowing you to use part of the death benefit for medical expenses if you’re seriously ill, though this reduces the eventual payout. Policies with a cash value can also be used for various needs, including medical bills.

Life Insurance Coverage

Death Benefit

The death benefit is the key feature of life insurance, typically providing a predetermined lump sum to beneficiaries upon the policyholder’s death. This payment supports the family’s financial needs, from everyday expenses to large debts and funeral costs. It’s an essential consideration in the estate planning process for those with substantial assets, helping manage taxes and maintain the estate’s value. It also offers a way to leave a charitable legacy.

Types of Deaths Covered

Life insurance covers various death causes, including natural, accidental, and illness-related. Policies generally help protect beneficiaries financially, with some offering extra for accidental deaths. However, exclusions often exist for high-risk activities and, in most cases, suicides within the initial years of the policy, among other things. Always check your policy’s specific terms.

Riders and Additional Coverage

Life insurance can be customized with riders, which can add specific protections to suit individual needs. An accidental death benefit rider increases the payout for accidental deaths, which maybe be useful for riskier lifestyles. A waiver of premium rider typically provides relief from premium payments if you become disabled. Critical illness riders generally offer a cash payout in the event that the insured is diagnosed with certain covered health conditions, aiding in covering treatment costs. These additions can help transform life insurance into a more comprehensive financial support system.

Cash Value in Permanent Life Insurance

Whole and universal life insurance policies typically include a cash value component, where a portion of premiums contributes to a growing financial asset. This cash value accumulates tax-free, and can be borrowed against, or even withdrawn, for various needs. This can be beneficial for long-term financial planning, offering an additional resource for retirement and supplementing traditional savings.

Health Insurance Coverage

Medical Expenses

Health insurance can significantly reduce costs associated with medical care. It typically covers hospital stays, prescription medications, and dental treatments. Some plans may also include alternative therapies like acupuncture or chiropractic care, recognizing their therapeutic value in overall healthcare.

Preventive Care

Preventive care is a key focus in most health insurance plans. This includes routine check-ups, vaccinations, and essential screenings like mammograms. Vision and dental preventive care are also often covered, encompassing regular exams and basic treatments.

Specialized Treatments and Services

Many health insurance plans cover specialized treatments essential to specific health needs. This includes physical therapy for recovery, mental health services like counselling, and essential maternity care. Rehabilitation services are also typically covered.

Out-of-Pocket Maximums and Deductibles

The structure of out-of-pocket maximums and deductibles in health insurance plans is key to financial planning. Deductibles are what you pay before insurance coverage starts, while out-of-pocket maximums cap your yearly spending. Once this cap is reached, insurance covers 100% of services, protecting against high medical costs.

Exclusions and Limitations

Health insurance plans often have exclusions or limitations, such as non-coverage for cosmetic procedures unless medically necessary. Some plans might not cover experimental treatments or specific drugs and can have varying policies on pre-existing conditions. These aspects highlight the importance of understanding your health insurance policy’s specifics to ensure it meets your health needs.

Types of Life Insurance Policies

Term Life Insurance

Term life insurance is straightforward – it offers coverage for a specific period, such as 10 or 20 years. If the policyholder dies within this period, their beneficiaries get the death benefit. It’s more affordable than other types and doesn’t generally include a cash value component, making it a good choice for those seeking basic coverage for a set time— for example until their children are financially independent.

Whole Life Insurance

Whole life insurance offers lifetime coverage with a fixed death benefit and a cash value component that grows over time. Its premiums are usually higher and stay the same throughout the policy’s life. This type of policy often provides for the accumulation of cash value, which can be borrowed against or even cashed out in certain situations.

Universal Life Insurance

Universal life insurance blends the death benefit of term life with the cash value aspect of whole life, but with more flexibility. Under a universal life policy, you can typically adjust your premiums and the death benefit amount over time, making it suitable for those whose financial situations might change. The cash value component can grow based on a fixed interest rate or a market-based return.

Variable Life Insurance

Variable life insurance is for those comfortable with risk. It’s similar to Universal Life but allows you to invest the cash value in different accounts, like stocks or bonds. This means your cash value can grow more substantially, but it also comes with the risk of market fluctuations, potentially affecting the policy’s value.

Types of Health Insurance Policies in Canada

Supplemental Health Insurance

In Canada, where provincial plans cover the majority of healthcare costs, supplemental health insurance can help pay for extras like dental work, prescription medications, vision care, and private hospital rooms. This type of insurance is valuable for filling gaps in provincial coverage and offering more comprehensive healthcare coverage.

Critical Illness Insurance

Critical illness insurance in Canada provides a one-time payment if you’re diagnosed with a specific serious illness, like cancer or heart disease. This payout helps cover expenses not included in provincial plans or other insurances, offering financial relief during a challenging time.

Disability Insurance

Disability insurance is crucial for income protection. If you’re unable to work due to a disability, it pays a portion of your income, which can help maintain your standard of living and financial stability during such periods.

Long-Term Care Insurance

Long-term care insurance is increasingly important as the population ages. It helps pay for the costs of long-term care services provided at home or in a facility when provincial plans do not fully cover them. This insurance is a key consideration for those planning for the potential need for prolonged healthcare services in later life.


In the life insurance context, beneficiaries are those you designate to receive the death benefit upon your passing. This can include family members, friends, trusts, or even charitable organizations. You can specify primary beneficiaries, who are first in line for the payout, and contingent beneficiaries, who step in if the primary ones are unable to. For minor beneficiaries, it’s important to establish a trust or appoint a legal guardian to handle the funds responsibly until they come of age.

On the health insurance side, beneficiaries often include both the policyholder and their dependents. This can extend to spouses, children, and, at times, other relatives, ensuring comprehensive health coverage for the family. Health insurance’s flexibility to adapt to changing family dynamics, like covering young adult dependents or including non-traditional family members, makes it an essential tool for family healthcare planning.

If you are still confused about life insurance vs. health insurance, reach out to one of our helpful agents.

Canada Protection Plan offers life insurance without the need for medical exams, just straightforward coverage tailored to your needs. Contact us now and get protected.

Canada Protection Plan is one of Canada’s leading providers of No Medical and Simplified Issue Life Insurance. Our mission is to provide reliable protection and compassionate service from coast to coast with easy-to-purchase life insurance, critical illness insurance and related products. Our expanding product choices will help you get the coverage and peace of mind you need for a better financial future. Canada Protection Plan products are available through over 25,000 independent insurance advisors across Canada.

422838 CAN (01/24)

Foresters and Canada Protection Plan (CPP), and their employees and life insurance representatives, do not provide, on Foresters behalf, financial, estate, legal or tax advice.

To learn more about Canada Protection Plan and our line of comprehensive No Medical and Simplified Issue life insurance solutions, call Broker Services at 1-877-796-9090 and we will be happy to assist you or put you in contact with Sales support in your region.

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