Life is not always planned. Yesterday you were engaged in your daily routine, and the next day you may be in a hospital bed because of sickness or accident. We can’t escape these from occurring, but we can prepare ourselves so that they won’t eat up our savings or leave our family in debt. That’s exactly why insurance comes into the picture.
Where your money and health are concerned, two very common types of insurance have many people in the dark: Health Insurance and Personal Accident Insurance. Their names sound rather similar, but they are quite distinct in what they cover and how they work. To many people’s surprise, it can prove to be one of the smartest financial decisions you’ll ever make to have both.
In this blog, we will explain each type in simple words, highlight the differences, and show how a term insurance policy is a part of the overall picture of financial security.
What is Health Insurance?
Health insurance is a type of financial safety net to catch you in the event you fall sick or are injured and need to be hospitalized. Health insurance covers your hospital expenses if you fall ill or get injured.
A good health insurance policy will cover:
- Hospital room hire fees
- Doctor consultation fees
- Surgery
- Medication while in the hospital
- Diagnostic tests like blood, MRI, or X-rays
Day-care procedures that need no overnight stay and costs before and after hospitalisation are even covered by some policies.
Example
If you are hospitalized due to dengue fever, your health insurance will pay for the room rent, doctor’s fee, medicine, and investigations, as per your coverage limit.
What is Personal Accident Insurance?
Personal Accident Insurance works differently. It does not pay your hospital expenses. Instead, it pays you a lump sum amount if you are injured, disabled, or killed in an accident.
It is especially valuable when you get into an accident that hinders your ability to work and earn a living.
A personal accident insurance policy usually covers:
- Death caused by an accident
- Permanent disability (for example, loss of limb or vision)
- Temporary disability (for example, fracture that keeps you away from working for some months)
- Occasionally fracture benefits and ambulance charges
Example
If you get into a road accident and cannot work for six months, your personal accident cover will give you a lump sum. You can use the money to pay rent, EMIs, school fees, or any household expenses.
The Main Differences in Simple Words
Both the insurance plans are for different reasons.
- Purpose: Health insurance should cover your cost of treatment and hospitalization due to illness and accident. Personal accident insurance should compensate you or your family with a lump sum in case of disablement or death due to an accident.
- Coverage: Health insurance covers illness and accident-induced treatment. Personal accident insurance covers only accident-related incidents.
- Benefit Type: Under medical insurance, the company pays or reimburses your healthcare costs. Under personal accident insurance, you are paid a lump sum cash that you can do anything you want with.
- Premium Cost: Medical insurance is more expensive because it protects against more situations. Personal accident insurance is cheaper.
- Best Use: Personal accident insurance is most suitable for income replacement in case an accident affects your working ability, and health insurance is most suitable for cost of treatment.
Why You Might Need Both
Most people think, “If I have health insurance, I don’t need accident insurance.” That is not true.
Let’s see: You have health insurance and are involved in a serious car accident. The policy settles your hospital bills, but what if you’re unable to work for the next year due to injuries? Who settles your day-to-day expenses, EMIs, or school fees for your kids?
That’s where personal accident insurance is necessary. It provides you with cash that you can spend on anything, not necessarily medical care.
Having both of these means that you are well prepared:
- Health insurance will pay for your treatment costs.
- Personal accident insurance will give replacement of lost income and take care of your family.
How a Term Insurance Policy Complements Them
A term plan is another very important financial protection. A term plan covers your family a great deal of money if you pass away within the term of the policy, because of illness or in an accident.
With all three, you get total protection:
- Term insurance policy – Covers your family financially after your death.
- Health insurance – Pays for hospital and medical bills when you are sick or injured.
- Personal accident insurance – Pays you in the event that an accident results in disability or death.
Which One Do You Choose?
It’s more a matter of having or not having both.
- If you have only health insurance, you could be financially strapped if an accident incapacitates you.
- If you hold a personal accident policy only, you will have to pay for your hospital bills yourself if you fall sick.Β
- If you hold a term policy only, your family gets cash only when you pass away, not when you are alive but cannot work.Β
The ideal combination is:
- Term policy β To cover your family in the long term.
- Health policy β To cover the cost of treatment.
- Personal accident policy β For compensation in case of an accident.
Cost Factors
The major benefit of personal accident insurance is that it’s inexpensive. You can obtain more coverage at a lower premium.
Health insurance is costlier as it covers more medical situations. Term insurance is also inexpensive on the basis of the high coverage it provides.
Pop Myths
Myth 1: “Health insurance covers all.”
Reality: It will not cover your loss of income in the event of an accident.
Myth 2: “Term insurance and accident insurance are equivalent.”
Truth: Term insurance gives protection for death by any cause, while personal accident insurance gives protection for accidents only.
Tips to Select the Appropriate Plan
- Choose a coverage amount that is in proportion to your salary and family needs.
- Check for other advantages like children’s education cover or ambulance charges in accident policies.
- Always read the exclusions first before purchasing.
- Use your plans wisely for total protection.
Conclusion
Illnesses and accidents can strike unexpectedly. A slip, a car accident, or a medical issue can upset your finances. That’s why it’s worth understanding the difference between health insurance and personal accident insurance β and to have both, as well as a term insurance plan.
Think of them as three layers of cover:
- Health insurance helps you avoid paying big bills in the hospital.
- Personal accident coverage keeps your earnings intact in the event of an accident.
- A term insurance plan ensures the future of your family in the event that you’re no longer around.
Having all three in your possession, you can live with ease, knowing you’ve built a robust financial stronghold over yourself and the people you love.