Accidents are the second major cause of death worldwide, after diseases and the most common cause of disability. Health insurance will take care of the expenses for hospitalization which may be required following an accident. But, is that enough? An Accident may result to death or disability rendering us incapable of working. Your life insurance policy will pay in case of unfortunate death, but will not pay if you are disabled, lose your job and remain bedridden for the rest of your life. That is when Personal Accident Insurance comes into the picture.
What is Personal Accident Insurance?
Personal Accident Insurance covers you against an unfortunate accident that may result into death or disability. Accidents include those caused by any violent external means like rail/road/air accidents, accidents due to falling, collision, fire, by drowning, snake/ animal bite, etc. This, like Critical Illness Policy, is a benefit policy and pays irrespective of any expenses being incurred. Only a valid accident should have happened resulting into either death or any of the defined disability (like loss of limbs, loss of sight or loss of body part). Some products also cover medical expenses due to the accident, child’s education expenses, funeral expenses in case of death and similar additional benefits at additional premium.
What is covered under the Policy?
A Personal Accident Insurance policy generally comprises of any or all of the sections mentioned below.
Death – In case of death due to accident entire amount of insurance is paid out as lump sum. In some products phased payout option is there.
Total Disability – In case of loss of two limbs, or loss of sight of two eyes or a combination of both or total disability certified by a doctor, entire amount of insurance is paid out. Some products offer more than the amount insured (up to 200%), due to the hardship involved in disability.
Partial Disability – In case of loss a body part (like fingers, hearing, etc), a percentage of the amount of insurance is paid out.
Temporary Disability – In case of being temporarily bed ridden, a weekly benefit amount is paid out.
Medical Expenses – In case of accident resulting into hospitalization, expenses incurred are normally paid till a defined limit.
Additional Covers – Varies from product to products. In case of death may include Funeral expenses, ambulance charges, evacuation charges, child education benefit, etc. In case of disability may include modification of home or vehicle, counselling, reconstructive surgery, etc.
Why Personal Accident Insurance if important?
- Personal Accident Insurance makes sure that after a major accident you are not only covered for the medical expenses or death, but also forthe loss of income that may occur. It is important for ensuring financial security of the family in case of disability of the bread earner.
- It will come useful to meet the EMI or other liabilities, which were to be met with your income. Sudden disability can ruin your present, drain your savings and make your future insecure(will take up Loan Insurance in next post).
- Premium for Personal Accident Insurance is dirt cheap(say INR 100-150 per lac of insurance).
- There is no medical checkup required to opt for the policy. This is because of the simple reason that accidents cannot be predicted.If they could be predicted, they could be averted!
- These covers are valid worldwide, even beyond geographical boundary of the country.
- Death or disability due toterrorist activity is also covered.
Important points to note while opting
- Though cover is available in the market for amount of insurance running into crores, but themaximum amount of insurance offered will depend on your income (such as up to 120 times of monthly or 10 of annual income). Being a benefit policy it intends to secure your families future as per their current lifestyle. So any exorbitant amount of insurance, not commensurate to your income, is not allowed.
- Housewives or self-employed(without any regular income) can also be covered, but up to a predefined amount (max 5L or 10L, depending on the policy).
- Though cover is open to all, but thepremium depends on your profession. This is because accidents are unpredictable, but their probability increases in some professions. A White Collar professional (office goers) will pay less premium than a Blue Collar professional (manual labor), who will in term pay less premium than those in employed in police force or as crew in ship.
- Not every accident is covered.Among others (though few), death or disability due to self-inflicted injury, breach of law or substance abuse are excluded.
- Any disability existing and known at inception will never be covered.
- This product is offered as a stand-alone policy or add-on cover with health, critical of life insurance policy.So you may not require a new policy.
- Remember that,premium for this policy is not eligible for any tax exemption.
So read widely and choose wisely.
Link to other blogs in the series:
- Decoding Insurance
- Health Insurance – Decoding Insurance
- Critical Illness Insurance – Decoding Insurance
- Top Up Health Insurance – Decoding Insurance