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Difference between Personal Accident and Term Insurance.

Many people may not be able to draw the difference between various life insurance plans. Term insurance is essentially a life insurance plan or health insurance plan. Term plans may come in many flavors, and the choice would depend upon individual preferences. There can be total insurance plans as well. Policy schemes are called term plans as they are applicable for a specific period called term. The premium payment frequency can be yearly, half-yearly, quarterly or even monthly. A term life insurance product typically provides cover for life. Term insurance scheme can have a pure life insurance provision or can be a mixed life insurance product.

Exclusive and inclusive life insurance and personal accident plan

Personal accident cover can be included in term insurance or can be an exclusive policy. Personal accident cover essentially provides cover for disability or demise due to the accident. Life insurance plan can be made to include personal accident rider at a nominal extra premium. Pure life insurance policy, however, does not provide accident cover. That is pure life insurance scheme does not provide cover for death or disability due to accident.

Exclusive personal accident policy does not include general life cover, and the cover for an accident can be more detailed as well as expansive. Life insurance policy covers the life of policyholder. In the event of the demise of the policyholder, the nominee or beneficiaries receive the death sum assured amount. Personal accident plan covers the policyholder for the accident; personal accident plan can also be made to include cover for family members.

Personal accident cover as part of other general insurance policies

Apart from inclusion in term insurance plans, personal accident cover can also be included in the comprehensive motor insurance policy. Several travel insurance products can also have domestic and global personal accident cover benefits. Under motor insurance policy driver is also covered for personal accident.

Sole and mixed health insurance term policy and personal accident policy

Health insurance or medical insurance policy is also a term insurance plan, as the policy lasts for specified term and premiums have to be paid periodically. Health insurance policies can be for one year to three years duration. If policyholder renews health insurance plan then cover is extended for the next tenure. Life insurance cover and health insurance cover are not combined into one product; they are offered as separate insurance cover. However personal accident cover can be coupled with a health insurance plan as well as a life insurance plan. There can also be an exclusive personal accident policy.

Tenure of life insurance term plan and personal accident policy

Life insurance policy has a long tenure of minimum five years and a maximum fifteen years. Life insurance plan can be renewed at the end of tenure. Term insurance plan provides cover up to sixty-five to seventy years of age. However, there are term life insurance schemes that provide cover well over octogenarian age.

Personal accident cover included as a rider in a life insurance plan will have the same tenure as the life insurance policy. Sole personal accident schemes have a shorter tenure of one to three years.

Covers available under term insurance and personal accident plans

Sole life insurance term plans offer pure life cover. Life insurance term plans can also be offered as a combined product, or there may be the option of including riders at additional premium cost. Combined life insurance products include products like ULIPs life plan, critical illnesses riders option and personal accident riders option. Pure life insurance products do not offer any maturity or survival benefit. Combined life insurance products can offer maturity and survival benefit like lump sum payout at the culmination of policy tenure.

Term insurance health plan offer cover for listed health conditions. Under health insurance cover plan policyholder/ beneficiary is entitled to claim due amount in the event of occurrence of listed illnesses or health conditions. Covered policy member is also entitled to cashless hospitalization in networked hospitals for treatment of listed conditions.

Personal accident cover can be included as a rider in a health insurance plan, or policyholder may also choose to subscribe exclusive personal accident policy. Personal accident insurance products typically provide cover to policyholder and policy members for recuperating from accidental mishap or for demise in an accident. Personal accident term insurance plan would cover costs for total or permanent disability; hospitalisation charges up to the limit specified.

Eligibility for term insurance plans and personal accident scheme

Life insurance products typically have eligibility for over 25 years of age. Some life insurance products can have eligibility above 18 years of age. The maximum age eligibility for life insurance product can be up to 60 or 65 years. Health insurance and personal accident cover can be for minor as well as adult members of the family. The policyholder needs to be above eighteen, but under an umbrella plan, minor family members can also be covered.

Life insurance policies can be subscribed by resident Indians. Health insurance and personal accident policies can be offered to NRI as well. Several health insurance products offer global health and personal accident cover.

Sum assured in term insurance and personal accident cover

Pure life insurance plans can have life cover over a crore with nominal premium. Health insurance term plans can have varied covers as per the preference of policy subscribers. Subscribers can opt for health insurance up to one lakhs or well over fifty lakhs depending upon what health cover requirements they perceive for self and family members.

Personal accident cover included as part of other insurance plans can provide basic cover of one lakh or above as per the preference of policy subscribers.

The premium frequency for term insurance and personal accident policy

Life insurance term plans can have a premium frequency of one year, six months, quarterly and monthly. Health insurance plans have a short tenure, and premium payment is usually made through annual mode. Health insurance policies with tenure above two years may offer discounts for lump sum premium payments. Personal accident policies also mostly have a yearly premium payment option.

Tax treatment for term insurance and personal accident cover

Life insurance and health insurance term plans are eligible for tax deduction benefits under section 80 C and 80 D of the income tax act. Personal accident policies are also eligible for tax deduction benefits under section 80 D. The limit of tax deduction allowed under section 80 C and 80 D is presently Rs 1.5 lakh and Rs 60,000 respectively.

Benefits of term insurance plans and personal accident policies

Life insurance term plans are associated with the following benefits:

  • Life cover till old age
  • High death sum assured benefits
  • Maturity and survival benefits (for mixed life cover products)

Health insurance term plans comprise the following benefits:

  • Cover for sudden illness, sickness
  • Hospitalization cover
  • Pre and post hospitalization cover
  • Health insurance riders (critical illness/personal accident)
  • Cashless hospitalization

Personal accident insurance comprises the following benefits

  • Cover for accidental injuries for self and family
  • Cashless hospitalization
  • Total, partial disability cover
  • Permanent and total disability cover

Exclusions under term insurance and personal accident cover

Life insurance and health insurance term plan and personal accident policies mention certain exclusions.

Life insurance company may not pay any death benefit for life insurance policy if the policyholder commits suicide within a year from the start of the policy. Health insurance products do not extend coverage for uncovered conditions like pregnancy, pre-existing disease, critical illnesses unless they are included as riders. Personal accident policies also spell out specific exclusions like irresponsible driving, participation in high-risk adventure driving, accident outside geographical coverage and other exclusion conditions.

Personal accident and term insurance FAQs

  1. What is instant personal accident cover?
  2. Instant personal accident covers are mainly associated with travel insurance, which can be either domestic or global. Personal accident cover benefit is inbuilt in the instant travel insurance product which can be bought instantly with the travel ticket. Instant personal accident cover features inbuilt in the travel insurance product offer cover from start to end of travel.
  3. Can mixed life insurance product combine health and personal accident cover benefits all in one?

Ans. Several companies are offering mixed products. Mixed life insurance products have life cover as the main cover benefit as well as additional cover benefits for health and personal accident. These mixed plans are also called total protect plans. Examples of total product plan offers are AVIVA term insurance products, Aegon Life + products, HDFC life, Edelweiss Tokio and other products.

  1. Can term insurance plans and personal accident policies be taken up at any stage of life?

Life insurance and health insurance plans can be taken up only till certain life stage for example till seventy or seventy years of age. Personal accident covers are short-term policies renewable till the age of sixty or sixty-five. However overseas travel insurance products may include personal accident cover or health cover benefit for super senior citizens as well.

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About the Author: Praveen Unnikrishnan

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