Many people get confused when it comes to understand personal accident insurance vs life insurance. Are they just the same? Or, are they different? Well, absolutely, they are different.
Today, our article is meant to understand the major differences between the two kinds of insurance either in general or in specific ways. So take your time to read our explanation below.
- 1 Understanding The Definition of Personal Accident Insurance and Life Insurance
- 2 Major Differences between Accidental Insurance and Life Insurance
- 3 Personal Accident Insurance Coverage
- 4 More Categories of Personal Accident Insurance Coverage
- 5 Reasons Why To Purchase Personal Accident Coverage
- 6 Life Insurance Types
- 7 What Does Life Insurance Cover That Personal Accident Insurance Does Not?
- 8 Conclusion
Understanding The Definition of Personal Accident Insurance and Life Insurance
Personal accident insurance is a type of insurance that provides protection of death and injuries caused by an accident only. This insurance is specifically available for individuals only when they are getting an accident. This way, the accident may cause impairment either the short-term o lifelong wounds or even death. This insurance covers the claims to accidental death, accidental dismemberment or accidental disability.
On the other hand, a life insurance is a contract between the insured and insurer. This way, the insurance company offers a lump-sum payment to the beneficiaries upon the death of the insured. This is called “death benefit”. This insurance plays the role as an income replacement for the family of life assured. Life insurance is available for everyone who is dependent on you financially when it comes to death.
Simple to understand, the personal accident insurance is a type of insurance which is specifically covering accidents only while the life insurance is the one that covers lots of coverage options depending on what the insured choose.
Major Differences between Accidental Insurance and Life Insurance
Personal accident insurance is also simply known as accidental insurance. In this regards, both of accidental insurance and life insurance provide a strong support for finance in case of death of the policyholders so that the financial future of policyholders will never be affected. The policies that a person purchases either from accidental life insurance or life insurance will be able to lead to a decent life economically in spite of your death.
Although the policies provided by both types of insurance similarly cover the death benefit, there is a major difference. Personal accident insurance covers the claim to death caused by an accident. On the other hand, life insurance covers the claim to death in general at which the causes of death can be various.
Below are the other differences between personal accident insurance and life insurance you may want to read carefully to understand the personal accident insurance vs life insurance.
- For individuals, personal accident insurance doesn’t offer the tax benefit while the life insurance is a tax-deductible. However, for companies, both of the insurance reduce profits and are treated as expenses.
- Personal accident insurance is cost-effective while life insurance is much more expensive. That is due to the fact that accidental insurance covers only a subset of the risks covered by the life insurance. This lead to a more affordable price of coverage.
- The personal accident insurance policy covers not only accidental dismemberment but also permanent total or partial disability, burns, fractures and etc. On the other hand, life insurance doesn’t have coverage for those medical eventualities. The life insurance provides only a death benefit.
- Someone can purchase an accidental policy as a rider or add-on coverage along with the health insurance or life insurance or life insurance. However, life insurance always becomes a standalone policy.
Personal Accident Insurance Coverage
In this personal accident insurance vs life insurance review, we also include the explanation of what personal accident insurance covers. In this regards, there are some standard coverage offered by the accidental insurance which are as follows:
Death that is caused by a car crash or other type of unfortunate accident will be covered in personal accident insurance. If you pass away in an accident, a 100% sum assured compensation will be given to your beneficiaries. However, the company that purchases the insurance will also receive the amount.
Permanent Total Disablement
There is always accidental injuries that make the insured impossible to work for the rest of his/her life. That is where permanent total disablement will provide coverage. Permanent disability deals with the permanent loss of functionality of both feet and limbs or even loss of vision that makes a person unable to work anymore. This way, a 100% payout will be given to the insured due to the permanent total disablement.
Permanent Partial Disablement
There is an accidental injuries that reduce the people’s ability to live normally due to the partial loss of limbs functionality. And, there is no opportunity to recover. This situation is the case that the accidental insurance covers. In details, the insurance will cover the permanent partial disablement that includes loss vision in one eye, knee injury or nerve damage. This way, the coverage is available only as per the sub-limit. This can be various between 50% and 100% depending upon the terms of the policy.
Temporary Total Disablement
Personal accident injury can also exist only on a temporary basis like the fracture which is covered with a particular sub limit payout of the sum insured. In these cases, the insured will be able to work again after certain time of recovery. Hence, the insured will receive weekly compensation of 1 percent of the sum insured up to 100 weeks. However, this also depends on the type of policy that the insured takes. And, the amount can be various depending on the insurance and customization.
More Categories of Personal Accident Insurance Coverage
There are also some other categories of coverage provided by the personal accident insurance. Those are terrorism, child education grant and additional benefits. Here are the detailed explanation you would probably want to check out:
Terrorist acts may cause injuries. And these injuries are covered in the personal accident insurance. In this regards, there are few insurance companies that offers coverage for injuries caused by terrorism acts. Thus, it is important for you to check the terms before you finally purchase an insurance coverage.
Child Education Grant
An education grant benefit will be given to your children when you suffer from permanent total disablement or have any accidental death. This coverage is subject to two children if they are below 25 years old. Well, this is an odd choice that you need to considerably choose.
One more coverage provided by personal accident insurance is additional benefits. Well, these additional benefits include ambulance charges, funeral expenses, hospital cash and fracture. These coverage will be available on payment if you take additional premium. So you should check which insurance companies that provide these additional benefits and include them in the policy.
Reasons Why To Purchase Personal Accident Coverage
Understanding personal accident insurance vs life insurance must also understand the reasons why people need to buy personal accident coverage though purchasing this insurance is only a small price to pay.
Well, the first reason is the fact that nobody know what may happen tomorrow. Thus, you need to buy an accidental policy along with the optimum sum insured as well as broader coverage. This will help you provide your family with the financial support whenever there is death or total permanent disability caused by an accident.
The accidental policy you purchase will allow you to face an unexpected thing confidently without feeling too much worried about how to deal with your financial condition. You can also ensure the strong financial backup to your family if you lose your income because of an accidental death.
Life Insurance Types
Now that you have known more about personal accident insurance, it’s time to learn about the other one, life insurance. Well, life insurance covers many things depending on the policy or coverage that the life insurance companies provide.
There are some types of life insurance including the term life insurance, whole life insurance and Variable Universal life insurance. Here are the detailed explanation of each:
Term Life Insurance
Term life insurance deals with the policies that are available at a certain times of frame. For example, a certain type of policies provided by the term life insurance is available for 30 years. This is considered the insurance type with the most affordable price to cover critical illness, accidental deaths and disability. However, if you are suffering from nothing in 30 years, you cannot take out the premium during that time.
Whole Life Insurance
Whole life insurance deals with the policies that have no time frame. Instead, this insurance covers your life for the whole life of your own. Even after you die, the whole life insurance policy you have purchased will be received by your beneficiaries.
Variable Life Insurance
Variable life insurance refers to policies that come with a portion premium in term of investments. This means that if to get the higher insurance pay out, you’ll need to make sure that the market is doing well during the time you claim your insurance benefits.
What Does Life Insurance Cover That Personal Accident Insurance Does Not?
There are definitely some conditions that the life insurance cover but the personal accident insurance does not. Though the life insurance may be more expensive, it has more coverage than the personal accident insurance does.
Here are what the life insurance covers that the accidental insurance does not:
Critical illness will be listed into the coverage of either term life insurance or whole life insurance. However, the size of coverage is different from one policy to another policy. Keep in mind that illnesses caused by accidents are not covered by life insurance.
Note, the premium you will pay can be bigger if you have already diagnosed with certain illness. That’s why, it is suggested that you take a good life insurance policy when you are still young and healthy.
Variable Universal Life Insurance
The options of variable universal life insurance investments are not included in the personal accident insurance policies. As we have mentioned, the accidental insurance covers only accidental harm, injury or death. Variable universal life insurance policies also lets you to select an investment portfolio for your savings to grow more than the original amount guaranteed by the insurance company.
Estate Tax Assistance
When a policyholder passes away, there is a certain life insurance that include assistance to pay out estate and inheritance tax for the beneficiaries included in the policy. Again, estate tax assistance is considered as an extended coverage that doesn’t exist in personal accident insurance.
Finally, we can infer from the personal accident insurance vs life insurance review that personal accident insurance simply provides coverage only for accidental injuries or death. On the other hand, life insurance offers more coverage options. The life insurance policies are much more expensive due to its wide range of coverage availability. In comparison, personal accident insurance is cost-effective since it covers only on accidental injuries or death.
Now which of the insurance do you prefer? It basically depends on your needs.