Accidents don’t just happen on the roads. They can occur in your office, while traveling or entertaining, or even at home while doing everyday chores.
In terms of your finances, they make a double impact. On the one hand, your healthcare spending increases as you undergo treatment. On the other, your income is disrupted till you recuperate. It is here that accident insurance plays the crucial role of keeping the pincers from closing on you and your family.
What is Accident Insurance?
Although accident insurance looks very simple apparently, it has its own set of complications that surface from time to time; unless there is sufficient clarity in the policy terms.
Accident Insurance is one of the most ancient forms of insurance; and evidently, the simplest among all the insurances. It exists both in the life and the non-life domains either as a rider or as a stand-alone product. The common guiding factor in both these classes is that the claim should be triggered only by the happening of an accident.
Further, it is also essential that accident should be the proximate cause of the event and where this condition is not fulfilled, it leads to a dispute in the settlement of claim. Although it sounds very simple apparently, it becomes a bone of contention in several controversial claims in both life as well as non-life classes of insurance; owing partly to the low awareness levels of the insuring public and also to the lack of clarity on what exactly amounts to an accident.
Accident Insurance as a Rider to your Life Insurance
In the domain of life insurance, it is offered as a rider on most life insurance contracts and usually to the extent of the basic sum assured at a very reasonable premium.
Like other life insurance riders, the maximum accident cover under riders is 30 per cent of the sum assured. Since most life covers end at around age 65, the coverage from accident riders end with the base policy.
Another important point to remember is that once the claim is made, lump sum amount will be paid in case of death or staggered payments made in case of permanent total disability – say 10 per cent of the rider cover annually over 10 years. In case you survive the accident, for most companies, the coverage effectively ends from the time you make the claim.
Personal Accident Insurance Policy (PAIP)
General Insurance companies also issue personal accident insurance policies (PAIP). This policy solely covers any bodily injuries due to accidents, which are external, violent and visible, as the definition goes. It covers you for four contingencies that may arise from an accident: death, permanent total disability, permanent partial disability, and temporary total disability. Like benefits of all insurance policies, buyers need to understand very well how these contingencies are defined in the policy.
Premiums don’t vary with age and insurers give a discount of around 10 per cent when you cover family members.
In Personal Accident policies, there is intense need for fulfilling the utmost good faith factor that forms the basis of the contracts as a detailed medical examination may not be possible in many cases.
Which form of Accident Insurance is better; Rider or PAIP?
If you compare the two options, PAIP has an edge for those covering all the four contingencies – you will get a weekly payout in case of temporary total disability; a facility that riders don’t have. This facility gives you a better income replacement stream too.
Also, PAIP’s coverage in terms of age limit is more and the coverage doesn’t end after a claim is made, as is the case with accident riders.
Your occupation is important in Accident Insurance
Both life and non-life insurers take your occupation into consideration before accepting the liability under accident insurance policies. The conditions of acceptance may be other than the standard ones in case of the occupation being a hazardous one.
People whose work is more static in nature, such as lawyers, accountants, teachers or the self-employed, are regarded as normal risk by the insurers. Builders, contractors, engineers and veterinary doctors, whose job includes frequent site visits, are classified as medium risk. Those who work in high-risk industries, with chances of accidents, fall in the high risk category.
PSU insurers charge premiums according to your risk profile, whereas some private insurers charge a flat premium, irrespective of your risk profile.
This once again emphasizes the fact that wherever there is a change in your occupation, you should bring that to notice of your insurer in order that the changed conditions are acceptable to the insurers, either at the same terms or revised ones according to the need. This is very critical and will help incase a subsequent claim arises after your occupation change.
Settlement of Claim under Accident Insurance
For a claim to be settled in this class of insurance, it is essential that all conditions of the policy are fulfilled meticulously and that the personal details of the claimant are established so that any possible impersonation is ruled out.
There is also emphasis on what really caused the accident, in order that a claim is admissible. It should be clearly understood that accidents occurring on account of such events as suicidal tendencies, self-inflicted injuries, intoxication caused by liquor or narcotics etc. are out of the purview of claim payment, for obvious reasons.
There is a need for larger and wider accident covers for all kinds of contingencies arising from accidents. There is also the need for other products that would cover other forms of disability.
Remember, disability may not just arise from accidents – it can occur from illnesses and diseases, economically crippling a person for the rest of his life. You can at least ensure that you get a cushion that’s available to help you recover in case you are hit badly in a moment of bad luck.