Many people think of life insurance when they hear the word insurance. That was the kind of impact life insurance has created on people, but in reality, life insurance is not the only insurance available in the market. Insurance can be life or non-life. Life insurance covers the life of individuals against death, whereas general insurance covers the bodily injury and property damage of the insured parties. Life insurance plans are only meant to cover the life of insured individuals and not any third parties, whereas general insurance plans cover the risk to third parties. Life insurance comes with insurance and investment options where the insurance section provides life cover to the individuals, and the investment option provides returns to the policyholder on their investments. Health insurance only covers the hospitalization expenses of the policyholder and is not meant to provide compensation in case of death or disability of the policyholder.
Similarly, personal accident only covers the death and disability of the policyholder and doesn’t cover the medical expenses in case of hospitalization. Every individual should have these three policies without fail. These 3 plans complement each other and provide the insured with most of the required protection.
What’s on this page?
Essential Insurance Policies: Understanding Their Complementary Benefits
| Feature | Life Insurance | Health Insurance | Personal Accident Insurance |
| What is it? | It is a contract between the insurance company and the insured to compensate the family members of the insured in case of the death of the insured due to any insured peril. | It is a contract between the insurance company and the insured to compensate the insured in case of hospitalization due to an accident, illness or disease. | It is a contract between the insurance company and the insured to compensate the insured or his/her family members in case of the death or disability of the insured due to an accident. |
| What does it cover? | Death- Natural and Accidental | Hospitalization expenses due to illness, disease or an accident | Death and disability only due to an accident |
| Whom does it cover? | Anyone who is the insured in the policy | Anyone who is the insured in the policy | Anyone who is the insured in the policy |
| Who can take it? | Any individual having an income and those who want to safeguard their lives against risks such as death and disability | Any individual exposed to health risks and those who want to safeguard their lives against risks such as hospitalization. | Any individual having an income and those who want to safeguard their lives against risks such as death and disability |
| What is the coverage called? | Sum Assured | Sum Insured | Capital Sum Insured |
| Type of Policy | Benefit policy | Indemnity policy | Benefit policy |
| Stand-alone or add-on | Can be taken only as a stand-alone policy | Can be taken as a stand-alone policy only | Can be taken as a stand-alone policy as well as an add-on |
| How is the premium calculated? | Premium is calculated majorly based on the age, coverage, health conditions, location etc. | Premium is calculated majorly based on the age, coverage, health conditions, location etc. | Premium is calculated majorly based on the occupation, age, coverage, health conditions etc. |
| Type of coverage | Individual, Group | Individual, Group, Family (family floater policy) | Individual, Group |
| Tax Benefits | Available under Section 80C of Income tax Act | Available under Section 80D of Income tax Act | No tax benefits are available for personal accident policies |
| Policy Term | Minimum Policy term is 5 years and maximum policy term can go up to whole life of the insured | Minimum policy term is 1 year and maximum policy term is 3 years | Minimum and maximum policy term is 1 year after which it has to be renewed. |
| Policy Type | Insurance + Investment options are available | Only insurance option available | Only insurance option available |
| Tenure | Fixed tenure. Cannot be changed during the policy period. | Flexible tenure. Policy tenure can be changed at the time of renewal | Flexible tenure. Policy tenure can be changed at the time of renewal |
| Renewability | Not permitted. Once the policy period is over, a new policy has to be purchased to continue the cover. | Policy can be renewed after the expiry of policy period with the same benefits or benefits can be added or reduced depending on the needs of the customer. | Policy can be renewed after the expiry of policy period with the same benefits.Benefits can either be added or reduced depending on the needs of the customer. |
| No Claim Bonus | Not available | Available as an increase in sum insured for every claim free year. | Available as an increase in sum insured for every claim free year. |
| Payment Type | Lump Sum or Periodic | Lump sum payment | Lump sum payment |
| Partial Loss | Not covered as only death is covered | Covered in the form of hospitalization amount | Covered in case of disability |
| Return of money option | Available in life insurance plans | Not available in health insurance plans | Not available in personal accident plans |
| Add-ons/ Riders | Add-ons or riders such as disability benefit, critical illness cover etc. are available on payment of additional premium | Add-ons such as critical illness, maternity benefit etc. are available on payment of additional premium | Add-ons such as transportation of mortal remains, child education benefits are available on payment of additional premium. |
| Waiting Periods | Pre-existing waiting periods might be applicable | Pre-existing, maternity, initial, specific disease waiting periods are applicable | Pre existing waiting periods might be applicable |
| Inclusion of family members | Family members cannot be included in the policy as it has to be taken on an individual basis. | Family members can be included in the policy. Family floater plans are available in which the sum insured would be floating among the members. | Family members cannot be included in the policy as it has to be taken on an individual basis. |
| Loan benefits | Life insurance policy can be used to avail loan after accumulating sufficient value under the policy | Loan cannot be availed in lieu of a health insurance policy | No option of availing loan in lieu of a personal accident policy. |
| Policy Cancellation after free look period | Policy can be canceled and refunds might be paid in some cases | Pro-rata/ Short period refund of premium could be provided if the policy is canceled after the cooling off period | Pro-rata/ Short period refund of premium could be provided if the policy is canceled after the free look period |
| Medical tests | Pre-policy medical tests would be required in most of the cases | Pre-policy medical tests would be required in most of the cases | No pre-policy medical tests are required for lower sum insured options. |
| Sum Insured range | Sum insured can range from 0.5 Lakhs to Crores. Pre-underwritten life insurance plans with up to 10 Crore sum insured are available in the market. Few insurers do not have an upper limit on the sum insured. | Sum insured can range from 0.50 Lakhs to Rs. 1 Crore in case of pre-underwritten plans. For higher sum insureds, separate underwriting would be done by the underwriters of the insurance company. | Sum insured can range from 1 Lakhs to Rs. 1 Crore in case of pre-underwritten plans. For higher sum insureds, separate underwriting would be done by the underwriters of the insurance company. |
| Portability | No portability option is available for life insurance plans | Health insurance plans can be ported from one insurer to another | Personal accident plans cannot be ported from one insurer to another |
For more details on life, health, and personal accident plans, please visit Ethika Insurance to talk to our insurance experts.
