Is Personal Accident Insurance Worth the Cost?

Insurance is a sure shot way to protect you from financial loss. With increasing financial literacy, you can hardly find a person who has not taken even a single insurance policy. Life insurance and medical insurance policy are held by most of the people, especially, by the head of the family or the breadwinner of the family. But accident insurance is one that not many people are aware of and also it is the one that most of them do not opt for.

Accident insurance- what is it?

The accident insurance policy is believed to give you complete insurance cover, even those that are not covered by your health insurance policy or the life insurance policy. It is considered because the accident insurance policy will allow you to claim benefits even when you are partially disabled for a certain period of time and not able to make a financial contribution during that period. However, it provides insurance cover in case of permanent disability and death by default too. When you think of buying accident insurance, youare to advise to compare accident insurance plans offered by different companies to save premium and get the best accident policy in terms of benefits and sum assured.

The cover

The major coverages you can expect from a personal accident insurance policy include

• Accidental Death

• Accidental disability

• Accidental Dismemberment

• Hospitalisation expenses

• Terrorism cover

• Family cover

However, the rules pertaining to the disbursement of the claims and exceptions and coverage of the policy is likely to vary across the companies. That is the reason you have to compare accident insuranceplans before you buy one. You may consider buying one to fill up the gaps in health insurance or to reduce the out-of-pocket medical expenses in case an accident.

How does accident insurance plan work?

It is similar to all other health or life insurance plans. You are supposed to pay the premium during the period of the policy. In case you face an accident within the period of the policy you would be receiving cash benefits. The cash benefits would be in line with the plan and the add-ons you had chosen when you bought the policy.

Types of accidents that are covered

The accident insurance plans are designed to provide cover even for small everyday tasks that might have turned troublesome like falling off a ladder, a bicycle accident and many other mishaps that might happen unexpectedly. But at the same time, there are a number of exceptions too. The exceptions may include high-risk activities like skydiving, bungee jumping, etc. certain sports and recreational activities also might fall under the exception criteria. The types of accidents covered vary from company to company and plan to plan. This is because if you choose a comprehensive plan, you might have to pay a heavy premium which will not be worthy.

What are the obvious features of the accident insurance plan?

The obvious benefits of accident insurance plan are

• The coverage starts immediately

• You are protected at all times throughout the year

• The claims are settled quickly in the form you requested, one- time settlement or monthly payouts or a combination of both. There are no network restrictions. You can avail treatment at any hospital or choose a physician of your choice.

• Age does not affect the premium you are supposed to pay for a plan.

Calculation of the premium for accident insurance plan

The premium is usually calculated differently for each type of plan. It is because of the number of add-on features like the terrorist cover, family cover and others that you might opt for. But the general basis for calculation is to link it to the amount of sum assured and the risk involved in the profession of the policyholder. Unlike other plans, the age does not affect the premium you have to pay.

Why is personal insurance not worth the costs?

There are a number of reasons that make a personal insurance cost a wasted investment some of them include

• You cannot avail tax benefits for the premium you pay.

• The exceptions for the claim are fairly larger than the inclusions. With every add-on the premium cost increases which mean that you are actually pending more on the policy which you might not be actually using.

• In case of death of the policyholder in an accident, the sum assured would be paid. But, it would be paid only based on certain limitations. To illustrate, if the policyholder is hospitalized after the accident and dies later, the sum assured would be given only if the death occurs within 15 days after hospitalization. If not, it is considered a death due to some other reason, and the amount would not be disbursed.

• Though the sum assured is settled in case of the death of the policyholder, in the case of partial disability only 50 % of the sum assured can be claimed. This makes it really expensive to get partial disability covered. This is because the premium increased when the sum assured increases.

• The accident insurance policy is not at all a substitute for the health insurance policy and life insurance policy. They are far more beneficial than these. Therefore, you cannot consider buying this by foregoing either one of them.

• While you compare some of the best plans in India, you will note that you can opt for a sum assured from a minimum 1 lakh to 50 lakhs. But the benefits you can expect for temporary partial disability is only 10% of the sum assured or in certain plans; it is the sum assured if the amount is five lakhs. The claim ratio is 68- 80%. This includes claim due to death of policyholder in an accident as well.

Though the costs of personal insurance are high, you may consider opting for one after you have a life insurance and health insurance policy in hand. But, that decision has to follow a complete analysis of the plans offered by different companies as well as the costs for optimal coverage.