Personal Accident Insurance vs Term Insurance

Term insurance is a type of life insurance policy in which the you get insurance coverage for a predetermined period of time. This time period is referred to as a "term". In case of your demise within this term, the nominee can claim the death benefit to cover their financial needs.

You can compare term insurance plans and select the one that suits your needs and budget.

Here are some of the notable benefits of term insurance:

Personal accident insurance is a policy that covers expenses incurred in the treatment of injuries, disabilities, or death caused by accidents only. It does not cover any illnesses. You can claim lump sum payouts in case of permanent disability to cover hospitalisation and medical bills and loss of income while recovering. In case of accidental death, some policies cover the policyholder’s funeral costs or dependent children's education.

Here are some of the benefits of personal accident insurance:

Here are some of the key differences between term insurance and accident insurance:

Personal accident insurance is as crucial as term insurance because both serve different purposes. Term insurance covers the policyholder’s demise if it occurs within the policy term, regardless of its cause. Thus, it provides financial coverage to the policyholder’s family at affordable premiums.

However, personal accident coverage is not available for natural deaths. It only becomes active in case of accidental death or disability, compensating for income loss due to the inability to work. This gap means term plans alone leave families unprotected against accident-specific financial hits.

When you pair them by purchasing a personal accident rider with a term insurance policy, you can get complete coverage of both policies.

Moreover, you can avail tax deductions under Sections 80C and 10(10D). Purchasing a term life insurance accidental death benefit rider extends your benefits by providing worldwide accident coverage. However, the premiums may vary based on your risk profile.

Note: Tax deductions under Section 80C are only available under the old regime.

By adding an accidental death benefit rider to your term insurance plan, you can enhance the coverage of the base plan. Therefore, you can double the benefits of your base term plan without any medical underwriting in qualifying cases.

This rider enhances your base sum assured to cover the loss occured due to your demise caused by an accident. These unfortunate events can be fire, a road crash, or aeroplane crash, etc. This rider excludes injuries or death caused by self-harm, suicide, or hazardous sports. Some insurers bundle it with disability benefits to compensate for income loss.

Premiums of this rider are low; by paying 20-30% extra, you can increase 80-90% of the base sum assured. You can apply for this rider while purchasing the term insurance plan or maybe later, before the term ends.

The choice of personal accident insurance vs term insurance depends on your risk profile, requirements, dependents, etc. If you are the primary breadwinner in the family, term insurance is an ideal plan. It pays a lump sum payout to the nominee in case of your demise during the policy term due to illness or accident.

Term insurance covers the living expenses of your family, long-term financial goals like education, or debt in your absence. Moreover, the premium of a term insurance policy is quite affordable with respect to the coverage it offers.

In contrast, personal accident insurance is ideal for those who travel a lot or are engaged in a risky job and need to drive regularly. It provides coverage against accidental death, permanent or partial disability, medical bills, or income loss caused by an accident.

Term insurance does not cover any of these unless you get a suitable rider. However, personal accident insurance does not cover natural or illness-induced death.

Both term insurance and personal accident insurance play a crucial role in safeguarding your family’s financial future. Apart from financial support, these policies ensure you have peace of mind.

Assess the difference between term insurance and accident insurance and choose policies that fit your lifestyle. You can determine your coverage requirements using a term insurance calculator. In the long term, taking preventative measures can save your family from even the worst circumstances.