Do I Need a Personal Accident Plan if I Already Have Life Insurance?

Life is full of unexpected moments. Even if we take precautions to keep ourselves safe, the fact is that accidents can happen anywhere, at any time.

Your job also affects the chances of you getting into an accident. A food delivery rider is exposed to a greater risk of accidents than someone who works from home, but even being office-bound doesn’t mean that you’ll be accident-free. You could crash off an unstable chair while reaching too far for something, trip over an unseen object in your path, or slip on a wet floor.

A personal accident insurance plan can help you manage the risks

What is a personal accident plan?

A personal accident, or PA, plan is a type of general insurance that provides you with financial support should an unfortunate accident happen. As the name suggests, a personal accident plan is meant to protect you from the aftermath of accidents, compensating you in the event of injury, disability, or death.

These plans provide coverage in three main categories:

1.    Medical expenses & hospitalisation

If an accident occurs, you may be able to claim certain inpatient and outpatient medical fees. However, coverage provided by a personal accident plan may not be as thorough as that provided by a life insurance plan, so you shouldn’t depend solely on it to cover all your medical costs.

Many personal accident plans allow you to add on riders for hospitalisation benefits, in the form of a fixed daily allowance during your hospital stay, broken bone benefits, ambulance services and/or medical evacuation and repatriation benefits.

2.    Temporary or permanent disability

Even a minor accident can cause temporary disability, leaving you unable to work for a while. Your personal accident plan can give you weekly cash benefits to help minimise any income you’ll lose due to your injury. It might not cover 100% of your wages, but this sum could help tide you and your family over a difficult time until you are well enough to work.

Unlike a life insurance plan, which will pay out only if you are left completely, permanently disabled, a personal accident plan covers any kind of disability, even temporary. You’re covered as long as an accident leaves you unable to work for a while, even if you don’t lose your eyesight, or a limb.

Certain plans let you buy extra riders for more income replacement benefits.

3.    Accidental death benefits

Should the worst happen, your next of kin would receive a payout, which would be in addition to any life insurance plan you have. The extra money from a personal accident plan would give your family greater financial stability.

What is a life insurance plan and what does it cover?

A life insurance plan pays out if you die, or are left with total and permanent disability. There are term insurance and whole life insurance plans.

Term life insurance keeps you covered as long as you keep paying your premiums. This usually lasts for a fixed duration, typically 20 to 30 years. The premiums are kept low and the plan itself does not accrue any cash value.

On the other hand, whole life insurance covers you for your entire life, often with an investment or endowment aspect tied to it. This means that the premiums tend to be higher than those of term life insurance, but the plan does accrue cash value.

Why do I need a personal accident plan if I already have life insurance?

This is a question asked by many Singaporeans. There are many myths around how personal accident plans work, and a common belief is that they aren’t necessary if you already have life insurance. Here’s why that’s not true:

1.    Life insurance does not cover accident-related injuries or treatment

Life insurance’s  main purpose is to provide coverage in the event of death and permanent disability, caused by accidental or non-accidental causes. However, most life insurance plans dont help to reimburse costs of treating injuries stemming from accidents.

2.    A personal accident plan has you covered no matter how severely you’re hurt

Some accidents may not be serious enough to warrant hospitalisation, just leaving you needing outpatient treatments such as traditional Chinese medicine. You’d have to fork out for those out of your own pocket without a personal accident plan, because life insurance plans typically don’t cover outpatient medical bills that arise from an accident. Unfortunately, some accidents can result in temporary or permanent disability, leading to a loss of income. Either way, a personal accident plan has you covered.

Another look at personal accident plans and life insurance plans

Personal accident planLife insurance plan
Main coverage areaAccident-related injuries or deathDeath by natural causes, total and permanent disability
Pre-existing conditionsPre-existing conditions are not considered during application, but claims will be limited to normal treatments.

For example, if the insured person is diabetic and suffers a fall, a personal accident plan claim will be limited to treatment for injuries from the accident, and not for complications that arise due to the underlying, pre-existing medical condition.

Pre-existing conditions are considered during application
AffordabilityLess expensiveMore expensive
CommitmentA monthly- or yearly-renewable policy termA fixed duration of typically 20 to 30 years, or a lifetime term
FlexibilityStandalone plan or optional riderStandalone plan
Tax benefitsNot tax deductibleTax deductible

So should I get a personal accident plan?

Everyone’s insurance needs differ, so it ultimately boils down to what’s important to you. To help you decide, ask yourself these questions: “Can I afford treatment if I get into an accident? How much can I afford to pay for insurance each year?”

In a nutshell, a personal accident plan can complement your core insurance coverage, serve as a safety net, and give you greater peace of mind in your financial planning.

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