Navigating the financial maze in India can often leave one feeling lost, especially with so many insurance options vying to grab your attention. Supporting aging parents, paying off home loans, and saving up for the children’s higher education- an Indian family member must juggle a dozen financial responsibilities. And amidst balancing these, an Indian family’s greatest priority is to ensure that they have enough to secure the future of their loved ones from life’s financial adversities.
And when you decide it’s time to invest in some sort of financial safety net, the first two things that come to mind are a term insurance plan and personal accident insurance. Many people often find themselves torn between the two and wonder if investing in the best term plan in India is sufficient or if they need a separate personal accident plan. It’s always necessary to understand the fundamental differences between the two from an Indian financial system’s perspective.
Understanding Term Insurance in India
As the name suggests, term life insurance plans are a straightforward, no-frills way of protecting your loved ones from a financial standpoint. With a term plan, you decide on the sum assured and the tenure of the policy, and in exchange for a low risk premium, you get absolute financial protection for your nominees in case of an unfortunate event like natural death, death due to an illness, or even death due to an accident.
This amount is crucial for families as it helps them with the monthly expenses, paying off long-term loans like home loans, and fulfilling other financial commitments. On the other hand, a term plan usually doesn’t offer any payout if the policyholder survives any of the aforementioned events.
What is Personal Accident Insurance?
Personal accident insurance, on the other hand, covers an individual from the financial consequences of an accidental injury. Indian roads are among the most dangerous in the world, making it next to impossible for the average individual to escape an accident. Personal accident insurance, therefore, is crucial as it pays out a substantial sum of money if the insured suffers any injury or death due to an accident, be it temporary or permanent.
Here are the most common benefits paid out under a personal accident insurance:
- Accidental death benefit: Payout if the cause of death is an accidental injury.
- Permanent total disability benefit: Payout if there is a permanent loss of any vital body part or function, for example, double vision, loss of both legs or arms, etc.
- Permanent partial disability benefit: Payout if there is a partial permanent loss of any body part or function, for example, loss of a finger, hearing, or vision in one eye.
- Temporary total disability benefit: Weekly cash allowance if the insured is unable to perform their daily duties for more than a short period.
The Main Difference Between Personal Accident Insurance and a Term Plan
It is a fairly common phenomenon that most policyholders, especially in India, believe that having the best term plan in india with a high sum assured is enough to protect their loved ones from any financial adversity. But the truth is that a term plan can only protect an individual from death-related financial consequences. If an individual survives an accident but is permanently disabled and is unable to work, a standard term plan wouldn’t cover any of the financial difficulties that such a disability may cause.
Let’s put this into perspective using an example that is very common in India. Say an individual is the sole breadwinner of their family. They survive a severe road accident but are permanently disabled and are unable to work for the rest of their lives. Since the policy was only bought to protect against the breadwinner’s death, there would be no payout under the policy. But at the same time, the daily expenses of the family remain the same or perhaps have increased. On top of that, they also have to bear the additional medical and living expenses that come as a result of the disability. In this situation, there is not a single amount that the insurance company would pay out to support the family.
Differences Between Personal Accident Insurance and Term Insurance Policies Explained
Scope of Coverage
A term plan covers death due to natural causes, illness, and accidental injuries. Personal accident insurance, on the other hand, is designed to cover financial losses due to accidental injuries.
Benefits Claim
A term plan only pays out a claim if the insured passes away and the claim is approved on the policy’s tenure. Personal accident insurance, on the other hand, pays out a claim for non-fatal injuries as well.
Income During Disability
A term plan provides no income during an incident that causes disability (be it temporary or permanent). Personal accident insurance, on the other hand, provides weekly income during temporary total disability as well as lump-sum payouts in case of permanent disability.
Premiums
The premiums for a term plan are dependent on the insured’s age, lifestyle, occupation, and health history. Personal accident insurance plans are usually dirt cheap, with the premium being decided mainly by the nature of the insured’s occupation.
Why Personal Accident Insurance is Worth Purchasing Alongside a Term Plan
For most earning members of a family, term insurance and personal accident insurance aren’t about choosing between the two. Rather, it’s about understanding the different financial needs of your family and making sure they are adequately covered. Having both policies is crucial for the following reasons:
Total Protection Against All Possible Outcomes
An accident can either result in death or disability. Getting both a personal accident policy and a term insurance plan ensures that your family is completely guarded against all possible outcomes of an accident, and no aspect is left uncovered.
Protection Against Monthly Expenses
An individual in India can’t survive without a certain amount of money per month to be able to afford their regular expenses. If such an individual is unable to earn money due to an injury, a personal accident insurance policy’s weekly allowance keeps them from having to liquidate their long-term plans and savings, especially those set aside for their children’s future.
Affordable Premiums for Enhanced Protection
Personal accident insurance is amongst the most affordable forms of financial protection available in India. It can provide you with a fairly large sum assured for a minuscule premium that wouldn’t put a dent in your family’s monthly budget.
How Personal Accident Insurance and Term Insurance Can be Combined
You don’t need to complicate the process of buying personal accident and term insurance. Here are two ways through which you can buy both:
Add an Accidental Rider to the Term Plan
Most life insurance companies allow you to buy additional riders to your term plan that add more benefits to your policy. For instance, you can get an accidental death and disability rider to your term plan that provides an additional payout in case of accidental death or permanent disability. Purchasing additional riders to the term plan is a great way of combining both kinds of insurance as it reduces the overall hassle.
Purchase a Standalone Personal Accident Insurance
You can also purchase a completely separate personal accident insurance from another company. Standalone personal accident plans, in most cases, tend to offer more benefits than the policy riders provided by life insurance companies.
Who Should Purchase Personal Accident Insurance Right Away
Although personal accident insurance is beneficial to everybody in India, some people tend to face a lot more risks on a daily basis than others. The following categories of people should seriously consider buying personal accident insurance right away:
People Who Face High Risk of Getting Into an Accident
Many people in India face a very high possibility of getting into an accident due to their profession or the way they commute. Some examples are taking transport on two-wheelers, crowded buses, or traveling on highways.
The Sole Breadwinner of the Family
If the whole family depends on the income of one person, any form of physical damage that disables that person from working can bring the family’s finances to a standstill.
People Employed in High-Risk Professions
People working in manufacturing units, construction sites, and other field-related jobs face the risk of getting into an accident at work.
People Who Have Active Loans
If a person has active loans, they stand to lose a lot more if something were to happen to them. This is especially true for home and car loans that often require regular monthly payments to be made.
Conclusion
When thinking about the future, it’s important to think through multiple scenarios instead of one. Buying the best term plan in india is an important step towards making sure that your family’s future financial needs are looked after when you’re not there to provide for them. But on the other hand, personal accident insurance looks after the other end of the spectrum and ensures that your family doesn’t run into financial difficulties due to an incident that temporarily or permanently disables you. Using both these insurance products in unison can provide you with total financial security and peace of mind.
