What is the Difference Between Life Insurance and Personal Accident Insurance?

Posted on: Jul 2, 2024 | 3 mins | Written by: HDFC ERGO Team

What is the Difference Between Life Insurance and Personal Accident Insurance?

Despite the many difficulties we face, life is precious. Especially if you are the only breadwinner, your family can find it tough to fend for themselves if anything happens to you. Therefore, while we should hope for the best, we should also prepare for the worst, as knowing that you have prepared well for exigencies will bring more joy in living. And insurance is the best way to go about it. However, there seems to be confusion between life insurance and personal accident insurance. Are you unsure about which one to buy? Well, let’s explore the differences between the two plans so you can decide which plan suits your needs better.

What is Life Insurance?

Life insurance is a type of insurance product that offers death benefits to the insured’s family members or next of kin. This means if the policyholder or insured dies during the policy term, the insurance company will provide a lump sum compensation (up to the sum assured) to the policyholder’s family. Life insurance offers financial protection to the policyholder's family in the absence of the insured. If you are the sole earning member, a life insurance policy will secure your loved one’s future when you are not around. The insured must pay premiums at fixed intervals to keep the policy active. Some policies pay maturity benefits after the policy term ends.

What is Personal Accident Insurance?

Personal Accident (PA) insurance provides compensation to the insured for injuries, disability, or death due to an accident. If the insured suffers death or permanent disability in the accident, the insurer will compensate the policyholder or his/her family up to the sum insured. In case of partial disability, the compensation will depend on the severity of the disability. It also covers medical expenses, including hospitalisation and ambulance charges. PA coverage differs from life or health insurance policies and doesn’t cover death, disability, or injury due to diseases or illnesses.

Key Differences Between Life Insurance and Personal Accident Insurance

Although both provide financial protection during a crisis, there are some key differences between life insurance and personal accident insurance. Let’s look at these differences closely.

1. Personal Accident Insurance covers death, injuries, or disability due to accidents. But life insurance offers only death benefits. It provides a lump sum compensation to the nominee if the insured dies during the policy term.

2. Personal Accident Insurance covers only accident-related incidents and doesn’t cover death or injury due to illness. Life insurance, on the other hand, covers natural death as well as accidental death.

3. Personal Accident Insurance also covers medical expenses, including ambulance charges and hospitalisation costs, while life insurance is limited to death benefits only.

4. Life insurance is a standalone policy, while PA coverage can be taken as an add-on with health insurance.

5. PA cover must be renewed every year for continued coverage, while there’s no need to renew life insurance.

FAQs

1. Does Personal Accident insurance cover natural death?

No. Personal Accident Insurance covers death, disability, or injuries caused due to an accident only. It does not provide coverage for death due to ailments or diseases.

2. Why is life insurance called a death benefit policy?

Life insurance is referred to as a death benefit policy because it provides a lump sum compensation to the policyholder’s nominee in case of the unfortunate death of the insured while the policy is still active.

Conclusion

Both life insurance and personal accident insurance are crucial for providing financial security to the family of the policyholder if the insured suffers death or disability. If you are the only earning member, having a life insurance policy becomes critical to protect your loved ones in your absence. However, you can decide whether to buy both based on your affordability to pay the premiums of both policies.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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