From managing our daily finances to securing our future, financial services play a crucial role in our lives. This intricate web of services, encompassing everything from banking and investments to insurance and real estate, is constantly evolving, driven by technological advancements and changing economic landscapes. Understanding the various types of financial services available is essential for making informed decisions and achieving our financial goals.
This guide delves into the world of financial services, exploring their historical evolution, key players, and diverse offerings. We will examine the different categories of services, their functions, target audiences, and the benefits they provide. Join us as we navigate the complexities of the financial services landscape and gain valuable insights to empower your financial journey.
Introduction to Financial Services
Financial services encompass a wide range of activities that facilitate the flow of money and capital within an economy. These services are crucial for individuals, businesses, and governments to manage their finances, invest, and grow their wealth. They play a vital role in enabling economic growth, stability, and development. Financial services have evolved significantly throughout history, adapting to changing needs and technological advancements.
From the early days of bartering to the sophisticated financial markets of today, the industry has undergone a transformative journey.
Evolution of Financial Services
The evolution of financial services can be traced back to ancient civilizations. Early forms of financial services included bartering, lending, and money changing. As economies grew more complex, so did the need for more sophisticated financial services.
- Ancient Times: Bartering, lending, and money changing were the primary forms of financial services.
- Middle Ages: The development of banks and the use of credit emerged.
- Industrial Revolution: The rise of stock exchanges and insurance companies marked a significant shift in the industry.
- 20th Century: The development of mutual funds, hedge funds, and other investment vehicles further diversified the financial services landscape.
- 21st Century: The rise of digital technology and the internet has led to a rapid evolution of financial services, with the emergence of fintech companies and online platforms.
Key Players in the Financial Services Industry
The financial services industry is a complex and interconnected ecosystem, with a wide range of players operating across different segments.
- Banks: Banks are the cornerstone of the financial services industry, offering a wide range of products and services, including deposit accounts, loans, credit cards, and investment products.
- Investment Firms: Investment firms provide financial advice and manage investments for individuals and institutions. These firms include brokerage firms, asset management companies, and hedge funds.
- Insurance Companies: Insurance companies offer protection against various risks, such as health, life, property, and liability.
They provide financial security in the event of unexpected events.
- Financial Technology (Fintech) Companies: Fintech companies are leveraging technology to disrupt traditional financial services, offering innovative solutions for payments, lending, investment, and wealth management.
- Regulators: Government agencies, such as the Securities and Exchange Commission (SEC) and the Federal Reserve, play a crucial role in regulating the financial services industry to ensure stability and protect consumers.
Types of Financial Services
Financial services are essential for individuals, businesses, and the overall economy. They encompass a wide range of activities that help manage money, invest, and secure financial well-being. Understanding the different types of financial services available is crucial for making informed decisions about your financial future.
Categorization of Financial Services
Financial services can be categorized based on their function and target audience. This categorization helps to understand the diverse nature of these services and how they cater to specific needs.
Functional Categorization
- Savings and Investment Services: These services help individuals and businesses save and grow their money. They include deposit accounts, investment accounts, retirement planning, and wealth management. Examples include savings accounts, money market accounts, mutual funds, and individual retirement accounts (IRAs).
- Borrowing and Lending Services: These services provide individuals and businesses with access to capital for various purposes. They include loans, mortgages, credit cards, and lines of credit. Examples include personal loans, auto loans, home mortgages, and business loans.
- Payment and Transaction Services: These services facilitate the exchange of money between individuals and businesses. They include payment processing, money transfers, and electronic payments. Examples include debit cards, credit cards, online payment platforms, and mobile payment apps.
- Insurance Services: These services protect individuals and businesses from financial losses due to unforeseen events. They include life insurance, health insurance, property insurance, and liability insurance. Examples include term life insurance, health insurance plans, homeowners insurance, and auto insurance.
Target Audience Categorization
- Retail Financial Services: These services are designed for individual consumers. They include savings accounts, checking accounts, credit cards, loans, and insurance products.
- Commercial Financial Services: These services are designed for businesses. They include business loans, commercial real estate financing, merchant services, and investment banking.
- Institutional Financial Services: These services are designed for large institutions, such as governments, corporations, and non-profit organizations. They include treasury management, investment management, and capital markets services.
Table of Financial Services
| Type of Financial Service | Description | Target Audience | Examples |
|---|---|---|---|
| Savings Accounts | Accounts that allow individuals to deposit and earn interest on their savings. | Individuals | Checking accounts, savings accounts, money market accounts |
| Investment Accounts | Accounts that allow individuals to invest in stocks, bonds, and other financial instruments. | Individuals | Mutual funds, exchange-traded funds (ETFs), individual retirement accounts (IRAs) |
| Loans | Borrowing money from a lender with the promise to repay with interest. | Individuals and businesses | Personal loans, auto loans, home mortgages, business loans |
| Credit Cards | Cards that allow individuals to borrow money for purchases and pay it back over time. | Individuals | Visa, Mastercard, American Express |
| Insurance | Financial protection against unforeseen events such as accidents, illness, or property damage. | Individuals and businesses | Life insurance, health insurance, property insurance, liability insurance |
Banking Services
Banking services are essential for individuals and businesses alike, providing a range of financial tools and resources to manage money, make transactions, and access credit. Banks play a crucial role in the financial system, acting as intermediaries between savers and borrowers, facilitating economic growth and stability.
Types of Banking Services
Banks offer a wide array of services catering to the diverse needs of their customers. These services can be broadly categorized into several types:
- Deposit Accounts: Banks provide various deposit accounts, such as savings accounts, checking accounts, and money market accounts, allowing customers to securely store their funds and earn interest. Savings accounts are designed for long-term savings, offering higher interest rates than checking accounts. Checking accounts are used for daily transactions and typically have lower interest rates. Money market accounts offer higher interest rates than savings accounts but often have minimum balance requirements.
- Loans: Banks offer a variety of loans, including personal loans, mortgage loans, auto loans, and business loans. These loans provide individuals and businesses with access to capital for various purposes, such as purchasing a home, financing a car, or starting a business. The interest rates and terms of loans vary depending on the type of loan, the borrower’s creditworthiness, and the market conditions.
- Payment Services: Banks provide various payment services, such as debit cards, credit cards, wire transfers, and online bill pay. Debit cards allow customers to access funds directly from their checking accounts. Credit cards provide customers with a line of credit, allowing them to make purchases and pay them back over time. Wire transfers are used for fast and secure transfers of funds between accounts.
Online bill pay allows customers to pay their bills electronically, saving time and postage.
- Investment Services: Some banks offer investment services, such as brokerage accounts, mutual funds, and retirement accounts. Brokerage accounts allow customers to buy and sell stocks, bonds, and other securities. Mutual funds pool money from multiple investors to invest in a diversified portfolio of securities. Retirement accounts, such as 401(k)s and IRAs, allow individuals to save for retirement on a tax-advantaged basis.
- Other Services: Banks also offer various other services, such as safe deposit boxes, notary services, and financial planning. Safe deposit boxes provide a secure location to store valuable documents and belongings. Notary services provide legal verification of signatures. Financial planning services can help customers develop and implement financial plans to meet their goals.
Role of Banks in the Economy
Banks play a vital role in the economy by facilitating transactions, managing money, and providing loans.
- Facilitating Transactions: Banks act as intermediaries in financial transactions, allowing individuals and businesses to exchange money and make payments. They provide a secure and efficient way to transfer funds, process payments, and settle debts.
- Managing Money: Banks manage the flow of money in the economy by accepting deposits, making loans, and investing in securities. They create credit by lending out a portion of their deposits, which stimulates economic activity.
- Providing Loans: Banks provide loans to individuals and businesses, enabling them to make investments, purchase assets, and expand their operations. Loans play a crucial role in economic growth by providing capital for investment and innovation.
Traditional Banking vs. Digital Banking
The rise of technology has led to the emergence of digital banking, which offers a range of online and mobile banking services. Traditional banking and digital banking have their advantages and disadvantages:
| Feature | Traditional Banking | Digital Banking |
|---|---|---|
| Accessibility | Limited to branch hours and locations | Accessible anytime, anywhere with internet access |
| Convenience | Requires physical visits to branches | Offers online and mobile banking services |
| Fees | May have higher fees for certain services | May have lower fees or no fees for certain services |
| Security | Typically considered more secure | Security is dependent on the bank’s technology and security measures |
| Customer Service | Provides in-person customer service | May have limited in-person customer service |
Investment Services
Investment services encompass a range of financial products and strategies designed to help individuals and organizations grow their wealth over time. These services offer opportunities to participate in the growth of businesses, real estate, and other assets, potentially generating returns that exceed traditional savings accounts.
Brokerage Accounts
Brokerage accounts provide investors with the tools and access to buy and sell securities, such as stocks, bonds, and exchange-traded funds (ETFs). They act as intermediaries between investors and the stock market, facilitating transactions and providing access to research and investment information.
- Full-service brokerage accounts offer personalized advice and guidance from financial advisors, suitable for investors seeking comprehensive support. They often charge higher fees for their services.
- Discount brokerage accounts provide basic trading tools and access to market data at lower costs, appealing to investors who prefer to manage their investments independently.
- Robo-advisors utilize automated algorithms to create and manage investment portfolios based on an investor’s risk tolerance and financial goals. They offer low-cost and efficient investment solutions, particularly for investors seeking a hands-off approach.
Mutual Funds
Mutual funds pool money from multiple investors to invest in a diversified portfolio of assets, such as stocks, bonds, or real estate. This diversification reduces risk by spreading investments across various assets, mitigating the impact of any single investment performing poorly.
- Open-end mutual funds allow investors to buy and sell shares directly from the fund at the net asset value (NAV) calculated at the end of each trading day.
- Closed-end mutual funds trade on stock exchanges like individual stocks, with their prices determined by market forces and not necessarily tied to the NAV.
- Index funds track a specific market index, such as the S&P 500, providing investors with broad market exposure at low costs.
Retirement Planning
Retirement planning involves developing a financial strategy to ensure a comfortable lifestyle during retirement. This includes saving for retirement, investing in retirement accounts, and managing expenses during retirement.
- 401(k) plans are employer-sponsored retirement savings plans, offering tax advantages and often employer matching contributions.
- Individual Retirement Accounts (IRAs) are personal retirement savings accounts, allowing individuals to make tax-deductible contributions and grow their savings tax-deferred.
- Roth IRAs allow individuals to contribute after-tax dollars, with withdrawals during retirement being tax-free.
Risks and Rewards of Investment Strategies
Investment strategies carry inherent risks and rewards, depending on factors such as asset allocation, investment horizon, and market conditions.
- High-risk investments, such as growth stocks or emerging markets, have the potential for higher returns but also carry a greater chance of losses.
- Low-risk investments, such as bonds or cash equivalents, offer lower returns but provide greater stability and security of principal.
“The higher the potential return, the higher the risk.”
- Diversification, spreading investments across different asset classes, helps mitigate risk by reducing the impact of any single investment performing poorly.
- Investment horizon, the length of time an investment is held, influences the risk-reward profile. Longer investment horizons allow for greater time to recover from market fluctuations.
Investment Products and Services Offered by Financial Institutions
Financial institutions offer a wide range of investment products and services to meet diverse investor needs.
- Stocks represent ownership in publicly traded companies, offering potential for capital appreciation and dividends.
- Bonds represent debt securities issued by corporations or governments, providing fixed interest payments and principal repayment at maturity.
- Mutual funds pool money from multiple investors to invest in a diversified portfolio of assets, reducing risk and providing access to professional management.
- Exchange-traded funds (ETFs) are investment funds that trade on stock exchanges like individual stocks, offering diversification and liquidity.
- Real estate can provide income through rental properties and potential appreciation in value, but it also involves significant costs and management responsibilities.
- Commodities, such as gold, oil, and agricultural products, can offer inflation protection and diversification, but their prices are volatile and subject to market fluctuations.
- Derivatives, such as options and futures, are financial instruments derived from underlying assets, providing investors with leverage and hedging opportunities.
Insurance Services
Insurance services play a crucial role in mitigating financial risks and providing peace of mind by offering financial protection against unforeseen events. They function as a safety net, ensuring financial stability in the face of unexpected circumstances.
Types of Insurance Services
Insurance services are categorized based on the type of risk they cover. The most common types of insurance include:
- Life Insurance: Provides financial protection to beneficiaries upon the insured’s death. It ensures that loved ones are financially secure in the event of their loss.
- Health Insurance: Covers medical expenses incurred due to illness or injury, providing financial support for treatment and healthcare costs.
- Property Insurance: Protects against financial losses arising from damage to or destruction of property, such as homes, vehicles, or businesses.
- Liability Insurance: Provides financial protection against legal claims arising from accidents or negligence, safeguarding individuals and businesses from financial repercussions.
The Role of Insurance in Risk Mitigation
Insurance serves as a risk management tool, transferring the financial burden of potential losses from individuals or businesses to insurance companies. By paying premiums, individuals or businesses can access financial protection against a wide range of risks.
“Insurance allows individuals and businesses to transfer the financial burden of potential losses to insurance companies, providing peace of mind and financial security.”
Factors Influencing Insurance Premiums and Coverage
Insurance premiums and coverage are determined by various factors, including:
- Risk Assessment: Insurance companies assess the likelihood of an insured event occurring based on factors like age, health, driving history, and property location.
- Coverage Amount: The amount of coverage chosen by the insured directly influences the premium. Higher coverage typically translates to higher premiums.
- Deductible: The deductible is the amount the insured pays out-of-pocket before the insurance company starts covering expenses. A higher deductible generally results in lower premiums.
- Claims History: Previous claims filed by the insured can impact future premiums. A history of frequent claims may lead to higher premiums.
- Market Conditions: Factors like inflation, interest rates, and competition within the insurance industry can influence premium rates.
Real Estate Services
Real estate services encompass a wide range of activities related to the buying, selling, renting, and management of properties. These services are essential for individuals and businesses looking to invest in or utilize real estate for various purposes.
The Role of Real Estate Agents and Brokers
Real estate agents and brokers play a crucial role in facilitating real estate transactions. They act as intermediaries between buyers and sellers, providing expert guidance and assistance throughout the process.
- Listing and Marketing: Agents market properties to potential buyers, creating attractive listings and showcasing the property’s features and benefits.
- Negotiation: They negotiate the best possible price and terms on behalf of their clients, ensuring a fair and favorable outcome for both parties.
- Property Valuation: Agents provide insights into property values, helping clients make informed decisions regarding purchase, sale, or rental.
- Legal and Regulatory Compliance: They guide clients through the complex legal and regulatory requirements associated with real estate transactions, ensuring compliance with all applicable laws and regulations.
Understanding Real Estate Laws and Regulations
Navigating the real estate market requires a thorough understanding of relevant laws and regulations. These laws govern various aspects of real estate transactions, including:
- Property Ownership and Transfer: Laws define the rights and responsibilities of property owners and establish procedures for transferring ownership.
- Property Taxes: Regulations determine how property taxes are assessed and collected, impacting the overall cost of owning property.
- Zoning and Land Use: Laws regulate the use of land, specifying permitted activities and development restrictions.
- Environmental Regulations: Laws protect the environment by setting standards for land development and waste management.
Financial Planning Services
Financial planning is the process of creating a comprehensive strategy to manage your finances, ensuring you meet your financial goals and secure your future. It involves setting objectives, analyzing your current financial situation, and developing a plan to achieve your goals. Financial planning is crucial for individuals and families because it provides a structured approach to managing money, helping you make informed decisions and avoid financial pitfalls.
Importance of Financial Planning
Financial planning is essential for several reasons, including:
- Goal Setting and Achievement: Financial planning helps you define your financial goals, whether it’s buying a house, funding your children’s education, or retiring comfortably. By setting clear goals, you can develop a plan to achieve them, increasing your chances of success.
- Financial Security: A well-structured financial plan provides financial security by ensuring you have adequate savings, investments, and insurance coverage to protect yourself from unexpected events, such as job loss, illness, or accidents.
- Debt Management: Financial planning helps you manage debt effectively by creating a budget, prioritizing payments, and developing strategies to reduce your debt burden. This can free up cash flow and improve your overall financial health.
- Investment Management: Financial planning assists you in making informed investment decisions based on your risk tolerance, time horizon, and financial goals. It helps you diversify your investments and optimize your portfolio for growth.
- Retirement Planning: Retirement planning is a crucial component of financial planning. It involves determining your retirement income needs, saving for retirement, and investing wisely to ensure you have enough funds to live comfortably during your golden years.
Aspects of Financial Planning
Financial planning encompasses several key aspects, each contributing to a holistic approach to managing your finances.
- Budgeting: Budgeting is the foundation of financial planning. It involves tracking your income and expenses, creating a spending plan, and allocating your money effectively. A well-crafted budget helps you control spending, prioritize needs over wants, and identify areas where you can save.
- Saving: Saving is essential for achieving your financial goals, from short-term purchases to long-term investments. It involves setting aside a portion of your income regularly, building an emergency fund, and contributing to savings accounts.
- Investing: Investing allows your money to grow over time by putting it into assets like stocks, bonds, real estate, or mutual funds. Financial planning helps you determine your investment goals, risk tolerance, and investment strategy, ensuring your investments align with your overall financial plan.
- Retirement Planning: Retirement planning involves preparing for your financial needs after you stop working. This includes estimating your retirement income requirements, determining your savings goals, and investing wisely to ensure you have enough funds to live comfortably during retirement.
- Estate Planning: Estate planning involves preparing for the distribution of your assets after your death. This includes creating a will, establishing trusts, and appointing beneficiaries for your assets. Estate planning ensures your assets are distributed according to your wishes and minimizes taxes and legal complications.
Financial Planning Tools and Resources
Several tools and resources are available to help individuals manage their finances effectively.
- Budgeting Apps: Budgeting apps like Mint, Personal Capital, and YNAB (You Need a Budget) can help you track your spending, create budgets, and analyze your financial data.
- Financial Calculators: Online financial calculators can help you estimate retirement needs, calculate loan payments, and analyze investment returns.
- Financial Advisors: Certified financial planners (CFPs) can provide personalized financial advice and guidance, helping you develop a comprehensive financial plan that meets your specific needs.
- Financial Education Resources: Websites, books, and articles offer valuable financial information and resources, providing insights into various financial topics, from budgeting and investing to retirement planning and debt management.
Technology and Financial Services
The financial services industry has been profoundly impacted by technological advancements. From online banking to mobile payments, technology has revolutionized how we manage our finances. This evolution has also led to the emergence of fintech companies, disrupting traditional financial institutions with innovative solutions.
The Impact of Technology on Financial Services
Technology has had a significant impact on the financial services industry, leading to increased efficiency, improved customer experiences, and new financial products and services.
- Increased Efficiency: Automation and digitalization have streamlined processes, reducing costs and improving operational efficiency. For instance, online banking platforms allow customers to perform transactions, manage accounts, and access financial information 24/7, without the need for physical branches.
- Enhanced Customer Experience: Technology has empowered customers with greater control over their finances. Mobile banking apps, for example, provide convenient access to account information, transaction history, and personalized financial insights.
- New Products and Services: Fintech companies have introduced innovative products and services, such as peer-to-peer lending platforms, robo-advisors, and cryptocurrency exchanges. These solutions cater to specific needs and offer alternative options to traditional financial services.
The Rise of Fintech Companies
Fintech companies are startups and established businesses leveraging technology to disrupt the traditional financial services industry. They often focus on specific niches and offer innovative solutions to address unmet customer needs.
- Peer-to-Peer Lending: Companies like LendingClub and Prosper connect borrowers directly with investors, bypassing traditional banks. This model offers borrowers potentially lower interest rates and investors higher returns.
- Robo-Advisors: Platforms like Betterment and Wealthfront use algorithms to create and manage investment portfolios based on individual risk tolerance and financial goals. Robo-advisors provide automated, cost-effective investment advice for individuals who may not have access to traditional financial advisors.
- Mobile Payments: Companies like Venmo, PayPal, and Apple Pay have simplified payment processes through mobile apps. These platforms enable users to send and receive money, make purchases, and manage their finances on their smartphones.
Future Trends and Challenges in Financial Services
The financial services industry is expected to continue evolving rapidly in the digital age.
- Artificial Intelligence (AI): AI is expected to play a crucial role in financial services, automating tasks, improving risk management, and personalizing customer experiences. AI-powered chatbots, for instance, can provide 24/7 customer support and personalized financial advice.
- Blockchain Technology: Blockchain technology has the potential to revolutionize financial transactions, providing secure, transparent, and efficient record-keeping. Blockchain applications include cryptocurrencies, smart contracts, and decentralized finance (DeFi).
- Cybersecurity: As financial services increasingly rely on technology, cybersecurity becomes a critical concern. Financial institutions and fintech companies need to invest in robust security measures to protect sensitive customer data from cyberattacks.
Regulation and Ethics in Financial Services
The financial services industry operates within a complex regulatory framework designed to protect consumers, ensure market integrity, and promote financial stability. Ethical considerations are paramount, shaping how financial professionals interact with clients and conduct business.
Regulatory Framework
The regulatory framework governing the financial services industry is multifaceted and involves various levels of government, including national, state, and local. It encompasses a broad range of laws, rules, and regulations designed to protect consumers, promote market fairness, and ensure financial stability.
- Securities and Exchange Commission (SEC): The SEC is a federal agency responsible for regulating the securities markets, including stocks, bonds, and mutual funds. The SEC’s mission is to protect investors, maintain fair and orderly markets, and facilitate capital formation. It sets rules for disclosure, trading practices, and insider trading.
- Financial Industry Regulatory Authority (FINRA): FINRA is a self-regulatory organization (SRO) for the securities industry. It oversees brokers, dealers, and other financial professionals, setting ethical standards and enforcing rules to ensure fair and honest dealing with investors.
- Federal Deposit Insurance Corporation (FDIC): The FDIC is a federal agency that insures deposits in banks and savings associations. It also supervises and regulates these institutions to ensure their safety and soundness.
- Consumer Financial Protection Bureau (CFPB): The CFPB is a federal agency responsible for protecting consumers from unfair, deceptive, or abusive practices in the financial services industry. It sets rules for mortgages, credit cards, and other consumer financial products.
- State Regulators: Each state has its own regulatory agencies that oversee financial institutions and services within their jurisdiction. These agencies may have specific rules and regulations that complement or supplement federal laws.
Ethical Considerations and Best Practices
Ethical considerations are fundamental to the provision of financial services. Financial professionals are entrusted with their clients’ financial well-being, and they must act with integrity, honesty, and fairness.
- Transparency and Disclosure: Financial professionals should be transparent in their dealings with clients, clearly disclosing all relevant information about products and services, fees, and potential risks.
- Confidentiality: Financial professionals have a duty to maintain the confidentiality of their clients’ personal and financial information. They should only use this information for the purpose for which it was provided.
- Conflict of Interest Management: Financial professionals should be aware of and manage any potential conflicts of interest that may arise. They should disclose these conflicts to their clients and avoid actions that could benefit them at the expense of their clients.
- Competence and Due Diligence: Financial professionals should possess the necessary knowledge, skills, and experience to provide competent advice and services. They should conduct due diligence before recommending any product or service to a client.
- Professionalism and Integrity: Financial professionals should maintain high standards of professionalism and integrity in all their dealings. They should act in a manner that reflects positively on the industry.
Consumer Protection and Financial Literacy
Consumer protection and financial literacy are crucial for promoting responsible financial practices. Consumers need to be informed and empowered to make sound financial decisions.
- Consumer Protection Laws: Laws and regulations protect consumers from unfair, deceptive, or abusive practices in the financial services industry. These laws provide recourse for consumers who have been wronged by financial institutions or professionals.
- Financial Literacy Initiatives: Educational programs and resources promote financial literacy, helping consumers understand basic financial concepts, manage their finances effectively, and make informed financial decisions.
- Financial Counseling Services: Financial counselors provide guidance and support to individuals and families in managing their finances, developing budgets, and achieving their financial goals.
In conclusion, the world of financial services is vast and dynamic, offering a spectrum of options to meet diverse needs. By understanding the different types of services, their benefits, and potential risks, individuals can make informed decisions that align with their financial goals. As technology continues to shape the industry, embracing financial literacy and seeking professional guidance will be key to navigating the complexities of the modern financial landscape.
FAQ Explained
What is the difference between a bank and a credit union?
Banks are for-profit institutions that are owned by shareholders, while credit unions are non-profit organizations owned by their members. Credit unions often offer lower interest rates on loans and higher interest rates on savings accounts compared to banks.
What is the role of a financial advisor?
A financial advisor provides personalized financial guidance, helping individuals develop financial plans, manage investments, and make informed financial decisions.
What is the difference between a mutual fund and an ETF?
Both mutual funds and ETFs are investment vehicles that pool money from multiple investors to buy a basket of securities. Mutual funds are actively managed, while ETFs are passively managed, tracking a specific index or sector.
What is the difference between life insurance and health insurance?
Life insurance provides financial protection to beneficiaries upon the death of the insured, while health insurance covers medical expenses and healthcare services.