Buy a personal accident insurance

Sometimes when you do an online transaction there is a small checked box that offers accident insurance, automatically, on purchase. Many of us uncheck that box dismissing it as marketing propaganda. However, hidden behind that offer is a high quality Personal Accident insurance. This insurance, even on a standalone basis, can be good.

Personal Accident insurance pays a death benefit to your nominee if you die in an accident. It can also pay a sum assured if you are disabled. There are variants of Personal Accident with enhanced disability benefits and also some options that pay medical expenses. The insurance is economical: Rs 1 crore of cover can cost less than Rs 5,000 per year.

Typically, death benefit in personal accident is about Rs 10 to 20 lakh, but increasingly insurers are willing to issue larger covers of over Rs 1 crore. There are no restrictions on where the accidents take place and when. In that sense this is a 24X7, worldwide cover insurance. Because accidents are less dependent upon age or health, this insurance has one standard rate across most ages and does not require a medical test when buying.

Three types of disabilities are covered: permanent total disability, temporary total disability and permanent partial disability. If this sounds like a melange of temporaries and totals the main thing to remember is that if you are completely disabled and unable to move around, even for some time, then this insurance will pay.

Disability is well defined in the insurance and primarily refers to two limbs being incapacitated. If you are partially disabled, say one arm is severed, then a reduced sum assured will be paid provided the disability is permanent. Insurers do not easily cover temporary partial disability because this is so much harder to assess unambiguously and price.

It is possible to cover accident-related medical expenses. This is most useful in the case of fractures and minor burns that do not require hospitalisation and so are excluded in standard mediclaim. The amount of medical expenses is generally restricted, so do not expect large bills to be paid.

Personal Accident cover should be bought after you have a term and medical insurance in place. It is an excellent option for people that have chronic health conditions and find it difficult to buy regular term. At least this insurance covers death by accident and is a subset of regular term insurance. This is also a good option for youngsters who do not want to commit to buying a more expensive term insurance just yet.

Personal accident has more exclusions that a term insurance. The main exclusions are for drinking, negligence and illegal activity. Accidents, when you have consumed alcohol beyond allowed limits, are not covered and this is a major reason why road accident claims get rejected. In the case of accidents doctors submit a medico-legal report that will specify if you have been drinking. Negligence comes into play in situations such as drowning where a person may get into a stream without knowing how to swim or go on a boat ride without life jackets. Exclusion due to illegal activities is most common in road accidents if you do not have a valid driving license.

There are some disputes around what constitutes an accident or negligence. One of these has been whether animal and insect bites are an accident. Recent rulings suggest that these are accidents and a claim is payable. Many of these matters are being ironed out through court judgments and regulatory clarifications.

So, the next time you see a check box online offering personal accident, pause and read the details. It may be worth buying.

The writer is co-founder, www.securenow.in