Term Plan vs. Accidental Insurance

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Insurance is a contract, in the form of a policy, which provides financial protection or sum assurance in case of any unforeseen circumstances. Insurance policies are used to hedge against the risk of financial losses, that are both big and small in nature.

Most of us often find ourselves in the dilemma as to which insurance plan to choose so that the insurance portfolio we hold is secured. Among the multiple questions in our heads, one that is common across many is the difference between a term insurance plan and an accidental insurance plan.  Many of us are also not too sure as to if it serves our purpose to invest in both or either one of these insurance plans.

Further in the article, are the features of a term plan and an accidental insurance plan, and the difference between them. 

What is a  Term Insurance Plan?

A term plan has gained a lot of importance in the past few years and forms an important part of your insurance portfolio. Such a policy acts as a basic necessity when it comes to securing the financial future of your loved ones.

A term insurance plan is a form of life insurance that provides coverage against any unfortunate situation by entitling the insured’s dependents to receive the sum assured in the event of the insured’s demise during the tenure of the plan. However, if the insured survives the insurance term, there are no maturity proceeds provided, which is why the premiums charged on this plan are low.

The benefits of holding a term insurance plan:

  • Offers high life coverage at economical premium charges
  • These plans are simple in nature
  • Additional riders can be purchased that enhance the coverage of a term plan

What is Accidental Insurance?

Accidental insurance or personal accident insurance is a limited coverage option in which the insured’s dependents are entitled to receive the death benefit only if the demise or permanent disability of the policyholder is caused by an accident. This kind of policy does not take into account natural causes.

The benefits of holding accidental insurance are:

  • Financial assistance in case you meet with any kind of accident
  • Offered at economical premium rates

Term Insurance vs. Accidental Insurance

The major difference between a term insurance plan and an accidental insurance plan is that the term plan offers a death benefit or sum assurance for death arising from any cause, be it accidental or natural. However, personal accidental insurance only offers a death benefit or sum assurance if the death or total permanent disability is caused by an accident. It does not take into account the natural causes of death.

The personal accident insurance plan provides coverage for permanent total or partial disability, fractures, burns, accidental dismemberment, etc. Whereas, the term insurance plan does not cover these medical prospects. It only provides a death benefit if the policyholder passes away during the tenure of the plan and is beneficial for your financial dependents, however, it is not something that you will live to benefit from.

Summing it up!

Both, personal accident insurance and term insurance play a key role when it comes to managing the risk of your insurance portfolio.

The first and foremost priority for anyone should be to hold a good term insurance plan to financially protect the future of their family members. However, if you also want to aim at securing your life insurance portfolio and ensure maximum protection, then you can opt for a personal accidental insurance policy. This provides you with additional protection in case of any permanent disability caused in case you meet with an accident. This is something that is not covered under your term insurance policy. It also does not cover the medical expenses or the disability caused during an accident.

If you are someone who is involved in a profession that falls under the high-risk category, it is a good idea to mix your life insurance policy with a personal accident insurance policy so that you are provided with enhanced coverage, at a reasonable cost.

Therefore, you can opt for personal accident insurance as an add-on cover on your term insurance plan, but a term plan is a stand-alone plan.

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