Amongst all your must have insurance policies, personal accident insurance cover or personal accident insurance policy stands out as important as the others, namely term insurance and medical insurance.
If you don’t have one, your financial planning could go haywire. Imagine you commute to work in a two wheeler and are knocked down by a speeding vehicle that results in your hospitalization for 6 months or god forbid, some form of disability.
For no fault of yours, you would have to not only spent a great deal on medical expenses in the hospital, you would have also lost your income in the process as you can no longer attend work.
Thankfully, there is a insurance policy for your rescue.
Term insurance is an insurance cover you take to transfer the risk on your life to the insurance company. If you are no longer around, the insurance company will pass on the sum assured to your family members. Medical insurance (called mediclaim in India and same as health insurance) is to cover the expenses that you incur during hospitalization.
Similarly, the general insurance industry has on offer an insurance cover known as personal accident insurance that covers the risks that arise due to death or disablement caused directly and solely by accidents.
Personal accident insurance or cover provides compensation, in the form of a fixed sum of money, to you or your family members if you sustain injuries caused by an accident that results in death, permanent total disablement, permanent partial disablement or temporary total disablement.
How is accident defined. Accident means any sudden, unintended and fortuitous external and visible event, which might cause bodily injury or which leads to a physical disability or death.
To elaborate further, generally most of the standard accident policies provides the following three benefits.
Firstly, in the unfortunate event of accidental death, the sum insured is paid out to the nominees. It is to be noted that many policies put a caveat saying the death should happen within some time period of the accident, say within 90 or 180 days.
Secondly, the policy offers
- total payout of the sum insured in case of permanent total disability.
- a specified percentage of the sum insured in case of permanent partial disability.
Thirdly, in case of temporary total disability, a weekly benefit or compensation is paid for the total period of temporary total disability up-to a maximum of usually 52 weeks. This feature can be very useful to meet your family’s expenses when your income stops.
Along with the above benefits, with an extra premium you can also avail of the following other benefits.
- hospital cash. payment of money each day subject to some maximum days if accident leads to hospitalization.
- last rites. payment of money for funeral if accident leads to death.
- broken bones. payment of money if accident leads to broken bones.
- education grant. payment of money for education of children who are studying.
- ambulance and financial assistance is also provided.
Some terms explained
Generally, all insurance companies carry their own definitions of permanent total disability, permanent partial disability and temporary total disability but by and large they all mean the same.
What is permanent total disability. This disablement prevents one from engaging in his usual occupation or employment anytime in the future. This has to be certified by a doctor. The loss of use of any two limbs, or permanent and complete loss of sight in both eyes or injuries that render the insured incapable of earning an income is covered
under permanent total disability.
What do you mean by permanent partial disability. This disablement prevents one to work with the same efficiency and skill as it was prior to the injury. The permanent loss of any body part, one eye, one limb or one finger or a toe or injuries that render the insured incapable of earning an income and certified by a doctor is covered under permanent partial disability.
The word partial is used here because though the loss is permanent the impact of the loss on the insured’s life in partial.
What is temporary total disability. The insured in unable to perform any activity on a temporary basis. He is expected to recuperate and return to work eventually. This is again a doctor certified inability to engage in your usual occupation or employment due to temporary loss in any form eg, a fracture could render you incapable of earning for sometime.
Other key highlights
- Claims arising out of terrorism or acts of terrorism are also covered in some policies. This was not the case earlier but acts like 26/11 in India and the Bhopal gas disaster has changed the way general insurance companies offer these products.
- Most of the policies are valid throughout the world.
- No health check-up is required for policy issuance.
- In case of no claim in a year, the benefits can increase by 5% each year subject to a maximum increase of 25%.
- These policies are renewable year on year and so you can discontinue the policy if case you do not require it.
- Family, including spouse and children, can also be covered under the same policy.
What is not covered ?
Death, injury or disablement of an insured person as a result of the following conditions are generally not covered by these policies. Check your policy for the specifics.
- From intentional self-injury, suicide or attempted suicide
- Whilst under the influence of intoxicating liquor or drugs
- Whilst engaging in sporting activities (aviation or ballooning for example)
- Directly or indirectly caused by venereal disease or insanity
- Childbirth or pregnancy related
- War, invasion, act of foreign enemy, hostilities, civil war and many more
Is it expensive ?
For a 30 year old earning Rs 50,000/- per month, almost all the general insurance companies are offering such policies for a very small amount for a sum insured of Rs 5,00,000/- (as shown below). This is indeed cheap when compared to the hit you will take on your income earning capacity in case you become disabled.
Data from http://www.easyinsuranceindia.com as of Dec 2010
Do I need one ?
Accidents don’t come scheduled. They happen anytime and anywhere. The personal accident policy cover a number of eventualities, including train and road accidents, plane crashes, murder and even a slip in the bathroom.
In the event of your being bedridden, your income will stop. Who will provide for the financial commitments of your family. Buying such a policy is the best way to prepare yourself against any eventualities in life. If you think on this for a moment, you will realize that this policy will transfer the risk of temporary or permanent physical disability to an insurance company. So why not take it ?
This becomes more important if you are the only earning member in your house and have many dependents. Your entire family’s future financial goals depend on your income stream and should that stop because of an accident you meet with, they would be unable to meet any of their future dreams.