It’s not possible to predict when life may throw some unexpected emergency your way. And while there’s not much you can do about it, having a life insurance plan backing you up can be very helpful. Life insurance protects your family and helps ensure that they are financially well-equipped to protect their life goals.
And when it comes to buying life insurance, one of the key things that many people wonder about is the meaning and the scope of the different types of life insurance plans out there. Two such types of covers are term insurance and personal accident insurance.
Are they the same? What is a term plan, and what is personal accident insurance? Let’s find out the answers to these questions.
Term insurance is a kind of life insurance that provides you with a life cover for a specified period of time - or a specified term. In case the insured person passes away during the policy term, the insurance provider pays death benefits to the nominee of the insured. This ensures that the nominee and the surviving members of the insured person’s family are financially protected in case they lose the sole or the primary breadwinner.
The policyholder will have to pay the insurance company a premium in exchange for the life cover. These premiums can be paid monthly, quarterly, semi-annually or annually, based on the terms and conditions of the policy purchased. Some plans even offer the option to pay a lump sum amount as a single premium payment.
And while there is no term insurance age limit in place, generally speaking, each term plan comes with its own eligibility criteria. This includes the age range for purchasing the particular term plan. General consensus is that it is better to purchase term insurance earlier in life, since the premium tends to be lower for younger people.
What is personal accident insurance?
No matter how careful a person may be, the possibility of meeting with an accident on the road or in the course of travel is never entirely zero. A personal accident insurance plan helps protect people from the financial implications of such an unexpected accident.
It is a type of insurance that covers deaths that occur on account of accidents. Of course, the fine print may vary slightly from one plan to another. But generally speaking, personal accident insurance helps ensure that in case the insured person passes away in an accident that is covered by the plan, the nominee is paid the sum assured as death benefits. These plans may also cover the medical costs involved in treating the insured person depending on terms and conditions available in the respective product if they are injured in an accident, so they are not financially burdened by this unexpected occurrence.
Difference between term insurance and personal accident insurance
Personal accident insurance may seem to be very similar to term insurance, but there are many subtle differences between the two. Let’s find out what these differences are.
• Coverage offered:
Term insurance covers all kinds of natural deaths. Personal accident insurance, on the other hand, is specific to deaths or injuries caused specifically by accidents.
• Benefits paid:
Term insurance pays out death benefits to the nominees of the insured person, in case of the latter’s demise. Personal accident insurance, on the other hand, pays out death benefits in case the insured person passes away due to an accident only. This kind of insurance could also cover the cost of medical treatment depending on the product terms and conditions, in case the insured person is injured in an accident.
Reasons to buy term insurance
A personal accident insurance plan can be very beneficial, as you’ve seen in the previous sections. However, term insurance in India, despite being the simplest kind of life insurance there is, also comes with a range of benefits. For people whose primary reason is to ensure their family has a safety net in case of their demise, there are many reasons to buy term insurance plans.
Here are some of them.
- Term plans are the most affordable kind of life insurance.
- They help protect your family’s financial security in any eventuality.
- They offer optional add-on riders.
- They give you significantly high coverage at relatively affordable costs.
- The premiums are eligible for tax benefits u/s 80C of the Income Tax Act, 1961, subject to provisions stated therein.
That sums up the difference between personal accident insurance and term insurance in India. If you are unsure about which kind of insurance plan to get, take a closer look at the determining factors, like your life goals, your financial needs, your age, and the needs of your family. you may prefer to purchase a life insurance plan that checks all the right boxes so that you can ensure the financial security of your loved ones.