There are various types of personal insurance on the market, some of which are more easily understood than others. Two that people often confuse are life insurance and accidental death insurance since they both have to deal with a person passing. Here’s the difference between these two critical types of coverage.
Life Insurance Coverage
In the event of the policy holder’s death, life insurance kicks in. This policy pays out, often to the beneficiaries listed within the policy documents. There are various forms of life insurance, as well, each of which covers someone for different periods of time.
Term insurance is the first type, which can be purchased to cover you in the event of death from a period of one to thirty years. If you want to continue your policy after the term is over, your premium increases. There are various elements of term insurance you can change to meet your specific needs.
Whole insurance is also known as permanent, which means it lasts a lifetime so long as you pay your premiums. Premiums are calculated for your life expectancy before being broken down into annual or monthly payments.
Finally, there’s universal insurance. This is a term policy with an annuity, which acts as a cash account. Combined with your premium, the cash account works to keep your policy active for your lifetime. Like the above two varieties, you can also tweak this one to meet your specific needs.
Accidental Death Insurance
While life insurance covers your loved ones’ expenses in the event of your death, accidental death insurance is specifically designed for exactly what the name implies. Should you die suddenly from an accident, your policy pays out.
While this options is generally an add-on or rider to a life insurance policy, it can also be purchased separately. The benefit is providing additional funds to your loved ones to cover funeral expense, burial, and more.
Accidental death insurance also covers severe injuries, though. If your injuries are severe enough, for instance, you could receive a partial payout when you’ve been injured in a car accident. This can help mitigate the cost of healthcare or legal fees.
These policies also cover loss of speech, hearing, sight, and severed limbs or extremities. However, each has to be the direct result of an accident. Depending on the terms of the policy, it might not pay out if you die three or more months later. Make sure to pay attention to these time frames if you’re purchasing accidental death insurance.
Why Get Accidental Death?
While life insurance policies provide more coverage in general, accidental death insurance can fill in some vital gaps often left open without term insurance. If you work a more hazardous job, accidental will cover incidents at your vocation. The same is true of hobbies, such as skydiving, in many policies. Life insurance often does not cover these.
Accidental also does not require a medical exam and comes with lower premiums, which is a major benefit. This is also an excellent option if you have an uninsurable medical condition or a life insurance company will not accept you because of your age. Even if you can find life insurance in these cases, accidental will typically be the cheaper option.