Insurance is an essential aspect of personal finance planning. While life and health insurance are the most popular, other important insurance types offer a financial cushion in case of contingencies. One of these is personal accident insurance.
According to statistics, the number of traffic accidents in India increased from 3,68,828 in 2020 to 4,22,659 in 2021. While some of these caused deaths, some left people severely injured. This means that a significant number of households were left devastated.
If one of the primary earning members of a family suffers an accident, their death or injury may mean temporary or permanent loss of income. In the absence of adequate savings for such an unforeseen situation, the family may face significant distress.
Personal accident insurance can be beneficial in such situations. It helps families to focus on health and emotions while the finances are taken care of.
What is personal accident insurance?
Personal accident insurance is a way to protect your family against an unforeseen mishap that may cause death, disability, or injuries. The family is eligible for full compensation if the policyholder dies in an accident. The nominee mentioned in the insurance document will get the sum assured.
Apart from this, the policy may include other benefits based on insurer and policy type. Some possible inclusions of a personal accident cover include hospitalisation coverage, daily cash allowance and replacement of lost income for a limited period, and education coverage for the insured’s dependent children.
What are the different types of personal accident insurance?
Group and individual accident insurance are two categories of personal accident insurance. They have been explained in detail below.
1. Group personal accident insurance
Organisations where the employees are at a higher risk of accidents at work often invest in group personal accident insurance to secure their employees. Aviation, manufacturing, construction, mining, offshore research, and drilling are some of the sectors where business owners must buy group personal accident insurance.
While a group personal accident insurance policy is not a replacement for safety measures and medical facilities, it helps to cover the employees financially in case of unfortunate events.
2. Individual personal accident insurance
If you wish to safeguard yourself against death, disability, and injuries in case of accidents, you can opt for individual personal accident insurance. The policies outline coverage and inclusions and are useful for everyone, irrespective of their profession.
The importance of personal accident insurance
Common buyers of personal accident insurance policies include those in high-risk professions. Others often ignore these policies and rely only on their health and life insurance policies to cover them in case of an accident. While these policies may offer some respite from the financial burden, they aren’t as comprehensive as personal accident insurance and leave much to be desired in case of an accident.
Personal accident cover vs. life insurance and health insurance
The idea behind this comparison is not to choose personal accident insurance over life insurance and health insurance. Personal accident insurance complements health and life insurance and offers a more holistic financial cushion in case of an accident. Thus, it cannot be used as a replacement for life and health insurance.
- A life insurance policy offers the sum assured only after the insured’s death. However, personal accident insurance also covers income loss due to temporary and permanent injuries and disabilities. It also includes other benefits like pre and post-hospitalization coverage and educational support for dependent children of the insured person in the accident.
- Life and health insurance plans are often location-specific, but personal accident policies offer coverage globally. So, if an accident occurs when you are not in India, you are still eligible for all the coverage mentioned in the personal accident policy.
- The insurance premium for life and health insurance policies is age-specific, whereas it is occupation specific for personal accident coverage.
- You can also opt for a personal accident cover as a ride to your life or health insurance policy, but a separate policy offers more benefits.
Important points to remember before choosing personal accident insurance
1. Sum insured
The sum assured is the most important consideration when opting for personal accident insurance. Ensure the coverage amount is enough to cover your current salary and lifestyle needs. Before buying the policy, you can read about the inclusions, coverage conditions, and beneficiaries. The coverage you choose will also affect the premium amount.
2. Document requirement
In the unfortunate event of an accident, you or a family member but inform the insurer and provide the relevant documents for them to process the claim. This will include a claims form, proof of death or disability, autopsy report, copy of FIR, investigation report, medical records, hospital bills, and discharge summary if hospitalized.
3. Policy exclusions
A personal accident cover doesn’t cover intentional injuries, self-harm, war injuries, accidents caused under the influence of alcohol or drugs, adventure sports, participation in political or labour upheavals, childbirth, and death or disability caused due to past sickness.
An accident can catch you unarmed and devastate you and your family. Since there is already a lot to handle on the emotional front, relief from the financial burden can ease the situation to an extent. Investing in a personal accident cover helps prevent financial distress in an unforeseen event. You can compare policies online and choose one based on your budget.