What’s The Difference Between Personal Accident Insurance And Term Insurance?
Accidents can occur anytime, anywhere!
Let’s say a person, being one of the main earning members of their family, purchases a term insurance policy to secure their family’s future financial needs. Now, during the period of this plan, the person meets with a major accident and loses both their legs and is forced to quit their job for a couple of months to recuperate.
As a result of this incident, not only will there be a loss of income, but also a huge financial burden on the family. New expenses will have to be incurred, such as paying medical bills, buying a wheelchair, making certain modifications around the house, and so on.
To ensure one’s family doesn’t experience such a financial strain, we recommend purchasing a Personal Accidental Insurance Cover.
But, how is different from term insurance? Which is the right choice for you? In this article, we’ll dissect the differences between personal accident insurance and term insurance so you can make a well-informed decision.
A Term Insurance plan becomes a replacement for your income and helps your family with their financial needs in your absence. Your family receives a fixed sum assured in case you pass away during the policy period. This money can help your family achieve all their short-term and long-term financial needs without making any significant compromises.
Here are 4 scenarios in which we would recommend you buy a Term Insurance policy -
👉 If you have the financial responsibility of financial dependents like your spouse, retired parents, or children, etc.
👉 If you have major unfinished financial responsibilities such as children’s education, a big wedding, etc.
👉 If you haven’t made enough corpus for your family’s current and future financial needs.
👉 If you have taken a big loan (like a home loan or business loan) or have liabilities that could burden your family if you pass away.
Now let's take a look at what is covered under a Personal Accident Insurance plan.
There is a wide range of things covered under a Personal Accident Insurance Cover -
1️⃣ Permanent Total Disability
Here, the policy provides you with the entire cover amount in case you meet with an accident that causes irrecoverable injuries like blindness, losing both your hands or legs, etc.
2️⃣ Permanent Partial Disability
In case of irrecoverable injuries that result in partial disabilities such as losing a limb or a finger, the ability to hear, etc., you will receive a certain percentage of the total cover. For example, if you lose a thumb, the policy provides you with 20% of the sum assured.
3️⃣ Temporary Total Disability
The cover amount is provided for disabilities that temporarily make you bedridden. In such cases, you’ll receive a fixed percentage of the sum assured every week for a defined number of weeks to provide for loss of income due to absence from work.
4️⃣ Accidental Death
In case you pass away due to an accident, your family or nominee will receive the entire sum assured.
Note: The terms and conditions may vary across plans.
We would recommend that every earning individual buy a Personal Accident Cover. The reason is quite simple!
If you get disabled as a result of an accident, it means additional financial liabilities on your family’s shoulders - making up for the loss of income, paying your medical expenses, etc. In such cases, a Personal Accident Cover can help you and your family overcome the financial burden.
Now that we’re aware of personal accident and term insurance plans, what they cover, etc. let’s learn about the difference between personal accident and term insurance.
The following table is a comparison between Term Insurance vs Personal Accident Policy.
|Parameters||Term Insurance||Personal Accident Insurance|
|Purpose||It provides financial security to your family in case of your death during policy duration.||It provides financial security to you & family in case of death and/or disability due to an accident.|
|When will it pay?||Term insurance pays the sum assured to your family in case of death during the policy tenure.||It pays you or your family in the case of a death or disability attributable to an accident.|
|Who will get the money?||In term insurance, your nominee receives the money if you pass away during the policy period.||In personal accident insurance, you will receive the money if a disability occurred due to an accident. In case of accidental death, your family will get the money.|
|Cost||The most affordable life insurance cover e.g. a 30-year-old, Non-smoker male can get a term cover of 1 Cr at around 10,000 - 12,000 per annum.||PA covers are also quite affordable e.g. A policy with 10 lacs cover amount for a 30-year-old would cost in the range of Rs 1,000 - 1,500 per annum.|
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- Term insurance provides your family with a sum assured if you pass away during your policy duration.
- You should buy term insurance if you have financial dependants, have major unfinished financial responsibilities, haven’t made enough corpus, or haven’t cleared paying off large loans and liabilities.
- Personal accident insurance provides coverage for a wide range of disabilities and accidental death. The disabilities include Permanent Total Disability, Permanent Partial Disability, and Temporary Total Disability.
- In term insurance, the cover is provided to your nominee(s) after your death.
- In personal accident insurance, you receive the cover amount if you become disabled due to an accident. It helps you cover the costs of disability. In case of accidental death, your family will get the sum assured.
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