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Personal Accident and Term Insurance: What’s the Difference?

Personal Accident and Term Insurance: What’s the Difference?
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Buying the correct insurance plan for you and your family can really be a tough choice to make. Fret not, we are here to guide you through the way to secure yourself and your family for the future. 

The solution is Term Insurance!

However, it is observed that most of the buyers get confused about choosing between personal accident and term insurance. To clear all the ambiguities in this regard, we’ll be shedding a light on personal accident and term insurance and how they differ from each other.

Let’s Start with Personal Accident

As the old saying goes prevention is better than cure, personal accident insurance does that very same way by providing the much needed financial security in case of an accident leading to death or disability sustained by the policyholder. An accident may jeopardize one’s long term financial stability irrespective of the fact that he or she is salaried or self-employed. Such a misfortunate event affecting the mobility and in turn the flow of income can be a matter of great trouble. 

Don’t worry it’s never too late if you are young and looking forward to secure the financial future of your family in such a catastrophic event. You can consider investing in a personal accident insurance plan. Apart from providing financial assistance in case of an accident event, the policy remains as a source of income in case an accident disability leading to loss of income. An important contributing factor that makes personal accident insurance plans a must buy is the affordability; these plans, in general, are quite affordable and budget-friendly.

Here Comes Term Insurance 

Conventional term insurance is an integral part of your financial profile. For securing the future of your family a term insurance plan turns out to be a basic necessity. A conventional or traditional term insurance plan offers coverage by providing the nominees of the insured a death benefit during the years when the policy is active. It is very crucial to understand that the policy provides death benefit only if the demise of the policyholder occurs when the policy is still active; in case, the insured survives the policy period then the nominees would not be eligible for any death benefit or payout. There are various perks of buying term insurance, the first one being its affordability and accountability. Term insurance plans are the most basic and purest form of life insurance and therefore usually come with a low premium when compared to other plans.

Difference between Term Insurance and Personal Accident Insurance

Both term insurance and personal accident insurance are types of life insurance and differ from each other in various aspects. To be more precise-

  • First, a term insurance plan provides coverage against the death of the insured due to any reason (natural or accidental), whereas personal accident insurance offers death benefits only when death or disability has occurred due to an accident. 
  • Second, personal accident insurance does not provide coverage if the demise has occurred due to any natural reason. Most of the term insurance plans come with customizable rider options that offer additional accidental coverage over the basic plan.
  • Third, when it comes to the premiums, the primary factors that determine the premium of your term plan include the insured’s age, health, and annual income. Whereas in case of personal accident insurance, the premium is based on certain risk categories. Depending on the risk appetite of an individual, the premium may go high or low. Here various professions have been segregated into three categories as per the risk appetite they have. 
    • Risk class 1 – Teachers, bankers, managers, and lawyer’s, etc. fall in this category
    • Risk class 2 – People engaged in garage machines, building constructions, and contractual jobs fall into this category
    • Risk class 3 – People engaged in professions with high risk such as miners, people working in the installation of high tension wires, etc. fall into this category.

In a Nutshell

Now, that you have a sound understanding of both the types of plans, it’s your choice that matters the most. Investing in a term plan is a wise decision, however, if you’re looking to provide financial security to your family whereas you can take safety measures to prevent unfortunate accidents, you should consider both. Bonus point is- personal accident cover can be bought as rider as well.

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