Learn about the difference between Life Insurance and Personal Accident Insurance

A life insurance policy provides coverage based on your insurance needs, ensuring that your family is financially supported in the case of an emergency. The sum assured or the insurance coverage you choose is customizable depending on the term life insurance plan you choose, which means the sum assured can be as low or as high as you want, as long as you can manage the premium payments.

Despite this comprehensive insurance coverage, most term life insurance plan do not provide protection against specific risks. The majority of these risks revolve around accidental death and disability. This is where accidental death insurance can be useful.

What is life insurance?

Life insurance, as you may be aware, is a contract between two parties: the life insurance provider and the policyholder, in which the latter pays the policy premiums in accordance with their preferred mode and term of premium payment in exchange for the insurance coverage provided by the insurer, subject to the life insurance details specified in the contract.

The life insurance policy provides death benefits to the policyholder’s family in the event that the insured dies unexpectedly during the policy term of their term life insurance plan. Depending on the life insurance plan chosen, the policy may also provide maturity benefits in the form of savings or market-linked returns if the insured lives out the policy term.

The entire money assured by the policy is paid out upon the death of the policyholder, and all sorts of death, with the exception of specific exclusions, are paid to the nominee. However, no extra benefits can be provided above the sum assured.

What is the Accidental Death Benefit?

An accidental death benefit alone does not constitute a complete insurance policy. To receive a life insurance accidental death benefit, you must add an accidental death benefit rider to your existing life insurance policy. The additional but optional benefit is available for a nominal fee that is paid in addition to the base policy premiums.

The major reason an accidental death benefit rider is significant is because it covers accidental death and distributes benefits to the late insured’s family. Aside from the life insurance payout, the rider amount is an additional benefit that can assist the family in covering the various medical bills that may arise as a result of the event. Furthermore, the accidental death benefit covers damage to varied degrees caused by an accident.

As a result, the accidental death benefit or personal accident insurance rider is an optional benefit that can be added to a term life insurance plan and should not be mistaken as a standalone policy. 

What is the difference between life insurance and accidental death insurance?

Even though many people believe that life insurance and accidental death or personal accident insurance are very similar in nature, here are some of the primary differences between the two:

Cause and Nature of Death: Term life insurance plan are sufficiently flexible to cover a variety of causes of death, including not only natural death but also death due to medical illnesses. On the other hand, an accidental death benefit rider is designed to cover deaths and disabilities caused by an accident. If the death is due to natural causes, the rider’s benefits will not apply.

Policy Conditions: Life insurance provides more freedom in terms of policy term and premium payment terms, allowing you to choose the coverage you require and pay the premiums as per the frequency you choose. The premium payment for the personal accident insurance is fixed or will be determined by your base policy. You cannot select a different policy term or premium payment.

Choice of Plans: Though an insurance provider can provide various optional riders, there is little to pick from under a single rider that already has predetermined coverage, terms, and conditions. In that regard, life insurance plans provide extra inclusion including savings opportunities, investment options, and basic life insurance coverage, depending on the type of policy you select.

Benefit Payout: If you are involved in an accident that results in a crippling and permanent handicap of any limb or body part, your basic life insurance coverage will not cover the loss. However, personal accidental insurance riders will compensate not just for losses caused by accidental death, but also for partial or entire loss of limbs or physical capability.

Another key distinction between personal accidental insurance and a term life insurance plan is that life insurance premium payments can be paid out as a lump sum, a regular income, or a mix of the two for a set number of years. The terms of personal accident insurance death benefit policy change; based on the form and severity of the disability, a percentage of the rider’s sum assured will be paid out. Only in the event of an accidental death will the entire sum assured be paid out in one lump sum, with no additional benefits available.

So we are saying, 

Though a life insurance policy and a personal accident insurance rider are two distinct coverage alternatives, including the latter in your base life insurance policy can help boost the coverage and protection of your insurance plan. The personal accidental insurance cover, like any other rider, tries to extend your insurance coverage by protecting you from risks that your base policy does not cover.