Who should go for a personal accident cover

The insurance regulator, IRDAI, recently mooted the draft guidelines for a standard personal accident product and it is mandated to be offered by all general and health insurance companies. A personal accident plan covers a policyholder for injuries including permanent and partial disability due to accidents and pays the nominee in case of the death of the policyholder.

Given the choices in the market, introduction of a standard personal accident cover helps in easy selection of policy. However, since most term insurance and motor insurance policies existing in the market have these accidental cover in-built , should you go for a standalone personal accident cover? Here is an explainer.

Coverage

Personal accident policies are offered by almost all the general and health insurers. The claim amount depends on the type of impairment which can be permanent or temporary in nature. A permanent total or partial disablement is an injury that occurs within 12 months from the date of the accident and prevents the insured from attending to his/her normal duties. A temporary disablement is an injury that occurs within seven days from the date of accident. However, this period could vary with insurers.

In terms of compensation, the policy pays the entire sum insured to the nominee upon the immediate death of the policyholder due to accident, even if the death due to accident is caused within 12 months from the date of the accident.

Similarly, the insurer pays the sum insured in the case of permanent total or partial disablement (depending upon the impairment). In the case of temporary disablement, post the doctor’s certification, the insurers usually pay 1 per cent of the sum insured for each week during the period of temporary total disablement for a period not exceeding 100 weeks from the date of the accident.

This varies with each insurer. For instance, Reliance General Insurance provides 1 per cent of sum insured for each week not exceeding ₹5,000 per week up to 100 weeks. In case of SBI General’s policy, it pays 1 per cent of sum insured or ₹10,000 per week whichever is lower with one week (compensation) as deductible and the benefit is payable for 104 weeks.

Most insurers offer rider options too along with personal accident cover including cumulative bonus and hospitalisation expenses due to accident, education grant (where sum insured is paid for the education of child up to a certain limit), adaptation allowance (where payment towards cost of modifying insured’s house or vehicle to combat or adapt to disability) and funeral expenses. The rider options too vary with insurers.

The sum insured usually starts at ₹1 lakh and goes as high as ₹50 lakh or more.

With the standardisation in personal accident cover, the coverages and benefits will be common across insurers. The minimum and maximum sum insured is ₹ 2.5 lakh and ₹ 1 crore, respectively, and the policy period is for a year and can be renewed .

In addition to the above mentioned coverages, the policy provides three rider options; temporary total disablement, hospitalisation of medical expenses and education grant. It has made it mandatory to offer cumulative bonus as part of base cover where the sum insured shall increase 5 per cent in respect of each claim free policy year, provided the policy is renewed without a break subject to maximum of 50 per cent of the sum insured. No deductible is allowed in a standard product.

Your choice

Each type of insurance policy has its own core nature of coverages. For health it is to cover for hospitalisation expenses and for term life policy it is to provide protection to the family in the absence of a bread winner. Similarly, for personal accident cover, it is to cover for total or partial permanent and temporary disablement of the insured due to accidents.

However, most of the benefits are covered in a comprehensive term policy and your medical expenses are taken care by a health cover. This is considering you as a policyholder already have a term plan and a health plan. In such a scenario, you can give personal accident cover a miss.

But if you have a pure vanilla term cover (which covers only death benefit) and a health plan, then opting for a personal accident cover makes sense. The only key benefit of a personal accident cover is that it comes with the benefit of weekly payment (in case of temporary total disablement) that is not usually available in term plans.

When it comes to premium, a personal accident cover is far cheaper than a term plan. But the priority should be for opting for a term plan. A pure vanilla term plan starts at as low as **₹4,500 or less per annum and personal accident cover starts at **₹1,200 per annum and sometimes even lower.