What type of insurance contract is a personal accident policy?

A personal accident policy is classified as a benefit insurance contract because it pays out a predetermined sum to the insured or beneficiaries in the event of an accident that results in injury or death. This type of policy does not rely on the principle of indemnity, which is meant to reimburse the insured for actual loss incurred. Instead, benefit policies guarantee a specified payout regardless of the amount of financial loss suffered, typically providing financial support for medical expenses or compensating for loss of income due to the accident.

In contrast, other types of contracts, such as indemnity contracts, aim to restore the insured person to their original financial position prior to the loss, thus differentiating them from benefit contracts where the focus is on providing financial benefits based on the terms outlined in the policy. Understanding these distinctions is crucial in grasping the characteristics and aims of various insurance products.