Businessman Cyrus Mistry’s death in a car crash on September 4 has brought attention to personal accident (PA) insurance. A standalone personal plan covers against the financial impact of an accident.
"Personal accident insurance provides coverage against accidents leading to bodily injuries, disability (partial or complete) or accidental death," says Naval Goel, founder and chief executive officer (CEO) of PolicyX.com.
"It will always pay a sum assured if a person dies in an accident. However, several personal accident insurances also offer other covers. Specifically, they will pay a benefit if you have a permanent disability and some will also pay if you have a temporary but total disability," says Kapil Mehta, co-founder of SecureNow.
What's covered, what's not
Common inclusions are medical expenses incurred by accidental bodily injuries and partial or complete disability. On the death of a policyholder in an accident, the family receives a lump sum compensation amount. Personal accident plans are standalone or they can be packaged with health and life insurance.
"Apart from providing coverage against disability and death, many personal accident covers are well integrated to provide financial support to the insured’s dependents as it helps to offer education benefits to their children because, in many cases, the earning capacity of the individual may completely or partially decrease post the accident," says Tarun Mathur, chief business officer (CBO)- General Insurance Policybazaar.com.
Personal accident insurance covers hospitalisation, post-hospitalisation expenses, and cash allowance for a period. While the offering varies from insurers, it usually offers financial security against liability, medical expenses, hospital confinement allowance, children's education bonus, permanent total disability, and accidental death cover. Legal and funeral expenses are covered too.
It is important to understand and be aware of the exclusions. "Exclusions include non-accidental scenarios such as suicide, natural death, pre-existing disability, the influence of drugs, alcohol etc," says Goel.
Accidents are not paid for if an insurance claimant is intoxicated. "Similarly if you have broken a law that will not be paid. Extreme negligence or participating in adventure sports is also an issue," says Mehta.
Why get personal accident cover
Insurance cover is necessary for people working in jobs prone to accidents. Mehta says, "This is also relevant for most people below the age of 50 because their probability of an accidental death as compared to a natural death is relatively higher."
While buying an insurance plan, opt for cover against death and disability due to an accident. "The sum insured must be up to 100 times an individual’s monthly income depending on the insurance company they opt for." If someone travels abroad frequently, worldwide coverage is a must-have benefit. It is important to read the inclusions and exclusions of the accident scenarios covered by the policy, for instance, occupational hazards, etc,” says Mathur.
A personal accident policy needs to be renewed each year and the coverage starts from day one without a waiting period. "When opting for a personal accident cover, it's critical to make an assessment of the number of breadwinners in the household as well as their dependents. If you need to support your family and children financially, you can choose the coverage that best fits your needs while also considering the nature of your job," says T A Ramalingam, chief technical officer (CTO) at Bajaj Allianz General Insurance.
Motor insurance and accidents
Under motor insurance policy, the vehicle owner (either a two-wheeler or four-wheeler) must take personal accident cover. "It is not necessary that the customer needs to buy it along with the motor insurance policy. They may have an existing policy that covers a personal accident or can buy it as a standalone policy," says Mathur.
Whether a policyholder opts for a comprehensive motor cover or third-party liability cover, they are entitled to personal accident cover. "A PA cover under the motor insurance policy will pay for the compensation in case of bodily injuries, death or any permanent disability resulting due to an accident. The limit of the coverage is defined as Rs 15 lakhs by IRDAI," says Saurabh Jhunjhunwala, assistant vice president (AVP), insurance products & sales, Prabhudas Lilladher Wealth Pvt. Ltd, referring to industry regulator Insurance Regulatory and Development Authority.
In case of accidental death or total disability, the insurance company will pay the entire sum insured to the nominee.
Motor insurance payout amounts are much lower for personal accidents. "It is generally much better to buy a large sum assured that is available in the standalone personal accident policy," says Mehta. Note that the government has mandated a personal accident policy with motor insurance and, thus, it is integrated with car insurance policies.
"The absence of a PA cover can lead to legal consequences," Goel says.
No test is required for claiming accident insurance. "The primary advantage of our policy is that you don't need any prerequisite medical check-ups and it can be purchased individually. Accident insurance is by far the most crucial insurance policy," says Sanjay Datta, chief underwriting, claims and reinsurance, ICICI Lombard General Insurance.
Common questions
Many questions arise when it comes to claims. A lot depends on the terms and conditions, as they vary policy to policy and insurer to insurer. For instance, if someone didn't wear a helmet and met with an accident, would such a claim be accepted? "Yes, claims are admissible. Since we cannot establish the cause of neither accident nor death is due to "not wearing a helmet". This is legally not tenable," says Datta.
"If the local law required that the person wear a helmet then the claim will not be paid," says Mehta.
What if a person didn't wear a seat belt and met with an accident? The claim is admissible but legally not tenable if challenged in courts. Some experts say that if the law requires that a seat belt be worn, then the claim will not be paid. As far as overspeeding goes, Datta says, "This is subjective to the establishment of an accident due to 'Over– speeding’ and gross negligence of the driver as per First Information Report (FIR)."
"If it is proved that an accident occurred as a result of carelessness or reckless behaviour, such as failing to use a seat belt or helmet or driving too fast, the insurer may refuse to accept the claim," says Jhunjhunwala.
If a person meets with an accident in a different country, will the claim get passed? Ramalingam says, "If the insured has opted for a geography extension for the motor insurance policy, and the insured has met with an accident in reciprocal geography, then the PA claim will be settled as per policy terms and conditions." Usually, motor insurance is confined to national boundaries.
For a smoother motor insurance claim, Mathur says, "It is advisable that one must follow traffic rules at all times and ensure that they do not drink and drive or be driving under the influence of any substances."