What is Term Insurance?
Term insurance is an affordable way of getting a life insurance plan that provides financial protection for your loved ones over a fixed period. This period is referred to as the policy’s ‘term’. In case the life assured passes away during this term, the designated nominee receives a lump sum amount that is called a death benefit. These benefits can help the family to cover daily expenses, outstanding debts, or any major financial goals such as a child’s marriage or a home loan.
Unlike other life insurance types that include savings or maturity benefits, term insurance provides no survival or maturity payouts. i.e. if the sum assured survives the policy term, there is no money to be paid out. This is how these plans are more affordable, and the sum assured gets higher coverage at low-cost premiums.
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
Although both personal accident and term insurance are meant to offer you financial protection, these differ in their purpose.
For a term insurance plan, you get long-term protection for 10 to 30 years or more. The term also covers the life assured’s death due to natural causes or illness. Moreover, the sum assured is provided to the nominee either as a lump sum, monthly income, or a combination of both. But remember that it does not automatically cover accidents or disabilities unless you are adding extra riders.
On the other hand, in the case of a personal accident insurance plan, it is taken for 1 year and needs yearly renewal. It provides financial support only in case of accidental death or injury. The coverage is paid as a lump sum, and it often includes disability benefits. It also helps cover medical expenses due to accidents. This plan is ideal for people who have riskier jobs or travel frequently.
What are the Types of Term Insurance Plans?
Below are the most common types of term insurance plans available in India:
Level Term Insurance Plan
In a level term plan, the premium and the death benefit remain the same throughout the policy's term. If the life assured dies during the policy term, the nominee receives the sum assured. It is simple, affordable, and ideal for long-term financial protection.
Increasing Term Insurance Plan
In this plan, the sum assured increases every year by a fixed percentage, while the premium may remain the same or change slightly. It helps deal with inflation and rising financial responsibilities over time. It is suitable for those who want to increase their life cover to match future needs.
Decreasing Term Insurance Plan
This type of term plan offers a decreasing sum assured over time. It is usually used to cover liabilities such as home or personal loans. The premium may remain constant, but the payout reduces year by year. It is useful for people who want to protect against specific debts.
Term Insurance with Return of Premium Plan
Unlike regular term plans, where you get no maturity benefit, this plan returns the total premium paid if the life assured survives the term. It provides life cover during the policy term and returns the premium amount at maturity. It is ideal for those who want a refund of their investment.
What are the Types of Personal Accident Insurance Plans?
Personal accident insurance plans are designed to provide financial support in case of accidental injuries, disability, or death. These plans come in different types to suit the needs of individuals, families, and organizations. Here are the main types:
Individual Accident Insurance
This plan is meant for a single person. It covers accidental death, partial or permanent disability, and provides compensation based on the severity of the injury. It’s ideal for working professionals and individuals who want to secure their future against unexpected accidents.
Group Accident Insurance
Offered by employers or organizations, this plan covers a group of people under one policy. It is cost-effective and offers basic accidental coverage to employees. Though the coverage might be lower than individual plans, it helps employers offer basic accidental coverage as part of employee benefits.
How to Buy a Term Life Insurance Plan?
Buying a term life insurance plan is a simple and smart decision to secure your family’s financial future. Follow these easy steps:
Step 1: Research and Compare
Start by comparing various term plans. Look at features like coverage amount, policy term, claim settlement ratio, premium rates, and available riders. Choose the plan that best fits your needs and budget.
Step 2: Fill out the Application Form
Visit the insurer’s website and fill out the online application form. Enter your details, financial information, and nominee details carefully.
Step 3: Upload Required Documents
Submit scanned copies of documents such as Aadhaar card, PAN card, address proof, income proof, and recent photographs.
Step 4: Add Riders (Optional)
Select any extra coverage options like critical illness, accidental death, or waiver of premium riders to enhance your policy.
Step 5: Submit Form Online
Complete the proposal form at the site and upload the required documents. The insurer will review your application and inform you of the policy's approval or rejection.
Step6: Pay the Premium:
If the proposal is accepted, make the payment online using a debit card, credit card, UPI, or net banking. Once done, you’ll receive confirmation and policy documents.
When to Choose Term Insurance?
Limited Budget
Term insurance is one of the most cost-effective life insurance options available. It provides substantial coverage at affordable premiums, making it ideal for individuals or families who want to secure financial protection without stretching their finances.
Temporary Coverage Needs
Many financial obligations, such as mortgages, personal loans, or child education expenses, are temporary and reduced over time. Term insurance matches these temporary needs by providing coverage for a fixed period of time. Once the term ends, and the loan or expenses are cleared, you can either stop paying premiums or reassess your insurance needs without paying for lifelong coverage you may not need.
Coverage for a Specific Goal
If you want to ensure that a particular financial goal, such as paying off a home loan, covering children’s education fees, or managing other debts, is fully funded even if you pass away unexpectedly, term insurance is the best fit. It provides a clear, goal-oriented coverage amount for a set period, giving you peace of mind that your responsibilities will be met.
When to Choose Personal Accident Insurance?
High-Risk Occupations or Hobbies
If you work in a job that involves physical risks, such as construction, mining, or emergency services, personal accident insurance is a smart choice. It provides financial protection in case of accidental injuries or disability that your regular health insurance might not fully cover. Similarly, if you enjoy adventure sports or risky hobbies, this insurance helps secure your future.
Lack of Comprehensive Health Insurance
Personal accident insurance becomes essential if your health insurance policy has limited coverage for accidents or does not cover accidental disability and death. It fills the gap by offering specific protection against accidents, ensuring you and your family are financially supported in case of unforeseen incidents.
Financial Security for Dependents
If you have family members who depend on your income, personal accident insurance guarantees financial support in case of your accidental death or disability. This helps cover daily expenses, debts, and future needs, protecting your loved ones from sudden financial hardships.
Complementary Coverage
Personal accident insurance works well alongside term insurance or health insurance by providing added protection for accidental injuries or death. It complements existing policies, ensuring broader coverage and reducing financial risks related to accidents.
Term Insurance vs. Personal Accident Insurance
Coverage Scope
Term insurance provides comprehensive coverage against natural death and sometimes accidental death, depending on the policy and the add-ons. Personal accident insurance, however, covers only accidental death or disability
Beneficiary Payouts
Term insurance usually pays out a lump sum or periodic income to your nominee upon your death, offering financial security. Personal accident insurance pays a lump sum in case of accidental death or permanent disability.
Conclusion
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.
FAQs
What is the age limit required to opt for a term life insurance plan?
The age limit typically needed for a term life insurance plan is 18 to 60 years, though it may vary slightly across insurers..
What is not covered under a Personal Accident Policy?
In a personal accident policy, self-injuries like suicide, complications due to pregnancy and childbirth, war related injuries and accidents and hazardous activities are not included. It is essential to review the specific terms and conditions to exactly know what’s covered and what’s not in your personal accident insurance policy.
What is the age limit of personal accident insurance?
The age limit for personal accident insurance typically ranges from 18 to 70 years. When planning to buy a plan, analyze your needs, check your requirements and coverage needs.
What is accidental death coverage in term insurance?
Accidental death coverage in term insurance means the policy pays a benefit if the insured dies due to an accident. This is usually an optional rider added to the basic term plan.
What is the minimum coverage for Personal Accident Insurance?
The minimum coverage amount for personal accident insurance starts at ₹2.5 lakh. However, insurers offer various plans with different coverage limits depending on the policyholder’s needs.
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