The choice of the right life insurance policy might differ from one individual to the other, as what may suit you is not a possibility for someone else. In this article, we will discuss the two different types of life insurance plans, namely the Term Plan & Personal Accident Insurance Plan. Though both plans serve their distinctive purposes, but both of them offer financial protection to the policyholder’s family members.
What is a Term Plan?
A term plan is a type of Life Insurance plan that offers coverage for a specific period, where the policyholder chooses the sum assured. This plan provides death benefits to the nominees of the policyholder in case of their death, hence offering financial protection. The policyholder gets financial coverage over the insured’s life in exchange for the premium paid.
What is a Personal Accident Insurance Plan?
Personal Accidental Insurance is meant to provide financial protection to the policyholder against some unfortunate events like accidental death, bodily injuries due to an accident, total or partial disabilities, & permanent or temporary disabilities arising out of an accident. In the event of the unfortunate death of the policyholder due to an accident, his/ her nominee will receive 100% compensation from the insurance company.
Differences between a Term Plan & a Personal Accident Insurance Plan
Provided are the differences between Term Plan & Personal Accident Insurance:
| Basis of Difference | Term Plan | Personal Accident Insurance |
| Tenure | The duration of a term plan may vary, i.e., the coverage offered can range from 10 to 20 years, or more, depending on the plan chosen. | The duration of a personal accident insurance plan lasts for one year. |
| Renewals | There is no need to renew a term plan. | To maintain the continued coverage, this plan has to be renewed every year. |
| Coverage Amount | The maximum amount of coverage can be up to 20 times your annual income. | The maximum amount of coverage can be up to 10 times your annual income. |
| Disability Cover | This plan does not include any disability coverage; rather, critical riders can be added. | This plan includes disability & accidental death coverage. |
| Benefit Distribution Mode | The benefit of the sum assured can be claimed in the form of monthly income, lump sum, or both. | The benefit of the sum assured can be claimed in the form of a lump sum amount. |
| Risk Factor | This plan offers coverage in case an insured dies due to natural death. | This plan offers coverage in case an insured suffers from any disability or death due to an accident. |
| Compensation | If an insured dies, their beneficiary can claim the sum assured. | In case an insured gets injured due to an accident, he/she can claim the treatment costs according to the policy. |
Benefits of a Term Plan
Provided are the benefits of a Term Plan:
- One of the most important benefits of opting for a Best Term Plan in India is that the terms & conditions & the premium payment options are flexible, depending on the present financial position.
- This plan comes with high coverage at reduced & affordable premium rates, which ensures getting maximum security at reasonable prices.
- This plan provided financial security to the policyholder’s family members in case of their death.
- This plan provides an option to enhance the protection by adding critical riders like critical illness, waiver of premium, accidental death benefits, etc., at an added cost.
- Providing financial security to family members & making them capable of maintaining a desired lifestyle brings mental peace.
Benefits of a Personal Accident Insurance Plan
Provided are the benefits of a Personal Accident Insurance Plan:
- This plan offers compensation to the beneficiaries of the policyholder if the policyholder dies.
- This plan covers permanent total disability & offers financial assistance.
- This plan also covers partial permanent disability, which includes payment of the sum assured depending on the level of injury.
- This plan entitles the policyholder to receive the weekly allowances if temporary total disability occurs, resulting in loss of income.
- In case the policyholder dies due to an accident, this plan will cover the education-related expenses of their children as well.
- If the policyholder dies due to an accident, this plan will help in repaying outstanding loans, if any.
- This plan covers the cost of transportation of mortal remains if the policyholder dies due to an accident.
- This plan also covers the hospitalisation expenses, which include daily cash allowances.
- In case hospitalisation is being done in another city, this plan covers the transportation cost, including ambulance charges as well.
- This plan covers life support expenses as well.
Which is Better – Term Plan or Personal Accident Insurance Plan
While choosing between a Term Plan & Personal Accident Insurance, it becomes important to understand the core differences between the two. Both plans offer financial security & protection, but they serve different purposes under different situations. Let us evaluate how:
- Coverage Scope
A term plan is a broader term, which provides financial protection in case of accidental deaths or deaths occurring due to natural causes. On the other h&, personal accidental insurance covers accidental deaths only, which means natural deaths are not covered.
- Beneficiary Payouts
A term plan includes payment of death benefits to the policyholder’s nominees after their death, hence providing family members with financial support. On the other h&, a personal accident insurance plan includes payment of compensation in case of the death of the policyholder due to an accident. Hence, a term plan offers broader coverage in case of uncertainties.
- Cost-Effectiveness
Term Plans are quite cost-effective as they offer considerable financial security at an affordable cost.
Conclusion
Both the term plan & personal accident insurance plan have their own pros & cons. While choosing a plan between the two, you should consider your financial requirements, financial situation, coverage required, etc. Those individuals looking for significant coverage & protection, which includes natural death, can opt for a term plan. A term plan thus offers extensive coverage, providing financial security at an affordable price.
