Life is uncertain. An unfortunate accident can turn your life upside down. In such unpleasant situations, personal accident cover will come handy. It will meet the medical costs and/or provide compensation in case of death or disability.

Prime customers for personal accident cover

Anybody can meet with an accident. But certain occupations are more prone to accidents. Insurance companies segment individuals into low-risk, high-risk and very high-risk categories, basis their occupations, and charge different premiums accordingly.

• Low-risk professionals: corporate employees, teachers etc.

• High-risk professionals: builders, mechanics etc.

• Very-high risk professionals: journalists, police personnel, employees in explosive industries, mountaineers etc.

Types of Personal Accident Cover

There are broadly two categories to personal accident insurance policies:

• Individual PA cover: Individuals buy this policy which provides compensation to individuals in case of bodily injuries or death or disability due to an accident.

• Group PA cover: This policy is a popular choice for individuals falling in very-high risk, or high-risk professions. Group accident cover is undertaken by employers for the benefit of their employees. These policies typically carry low premiums, and offer limited benefits as compared to individual insurance coverages.

Benefits of personal accident insurance cover

An individual employed in a low-risk profession may feel a stand-alone personal accident insurance is not suitable for him/her. In these scenarios, purchasing accident cover as an optional rider with a life insurance policy or as an add-on to your general insurance may be your best bet.

However, it is important to note that these riders would not be as comprehensive as stand-alone personal accident insurance policies. For example, usually, a PA rider would not provide risk cover for disabilities (permanent or temporary) arising out of an accident.

There are 4 primary benefits provided by a typical PA insurance plan:

• Accidental death benefit: If the insured were to pass away due to an accident, the PA policy would pay 100% of the sum assured to the beneficiary mentioned in the policy.

• Total permanent disability (TPD) benefit: This refers to an irrevocable bodily injury which may render the individual incapacitated to work during his/her remaining lifetime. For example, loss of limbs, loss of speech, loss of hearing, loss of eyesight etc. In case of TPD, the entire sum assured is generally paid to the policy holder. However, there are provisions by some insurance companies wherein an even higher percentage portion than the original sum assured will be paid out.

• Permanent partial disability benefit: A permanent partial disability results from an illness or injury that causes a permanent bodily loss which hinders him/her in operating at their full capacity. This means that a person with a permanent partial disability can perform some but not all of their usual work functions, or can even perform their usual work functions but not in the full capacity. For example, loss of a thumb. In such scenarios, only a percentage of the sum assured is paid out to the insured individual.

• Temporary partial/total disability benefit: This benefit is provided in cases wherein an individual is totally disabled, and would not be able to work, but only for a certain time. For example, someone could break his/her leg, and due to the subsequent fracture be rendered out of a job for a while. In such cases, personal accident cover could be provided as a percentage of the sum assured or by way of fixed periodic payments for a stipulated time period.

While choosing a personal accident cover, it is very important to understand the definition of “disability” as there are different nuances attached to types of disabilities which may occur due to an accident.

There are certain other add-on benefits which can be provided by personal accident insurance policies:

• Hospitalisation expenses are provided for certain number of days.

• Ambulance chargers for carrying the insured person to a hospital, when injured due to an accident.

• In case of the demise of the insured due to an accident, the beneficiary may also receive compensation for repatriation of the mortal remains. Expenses incurred on any religious ceremonies may also be provided for.

• Education costs of a dependent child may be provided for to a certain threshold, in case of demise of the insured due to an accident.

Major exclusions in personal accident policies:

• Suicide or self-injuries

• Natural death

• Pre-existing disability or injury

• Influence of intoxicants by the insured resulting in accident/injuries/death

• Participation in adventure activities which require to sign a life waiver form

People engaged in low-risk occupations may not consider personal accident policies a necessity. But it is important to remember that accidents do not differentiate, and it is better to be safe than sorry.