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A mishap can easily devastate your finances. Here's how you can cover this risk at a very low cost

There are two important reasons why a person should buy personal accident insurance. First, India is the accident capital of the world, with a person dying every 90 seconds. According to the National Crime Records Bureau, 3.94 lakh Indians died in accidents in 2012. The second reason for taking this cover, of course, is that personal accident insurance is unique and provides a cover that no other policy does. A life insurance policy will give a lump sum to the nominee if the policyholder dies and a medical insurance policy will pay the hospital bills if he is injured.


But what if a mishap leads to a disability and impairs the individual's earning capacity?


The number of people injured in road accidents is nearly four times higher than the number of deaths. In 2010, nearly 1.3 lakh people were killed in road accidents in India. However, over 5 lakh were either seriously injured or permanently disabled. Whether the disability is total or partial, temporary (3-4 months) or permanent, the personal accident policy will come in handy . If the policyholder has opted for the benefit, the plan will also pay the medical expenses incurred due to the accident.

 

Most accident victims are young. In 2012, nearly 60% of the accidental deaths involved people aged between 15 and 44 years. A young person is more likely to have an accident and injuries than die of an illness. Yet, a personal accident and disability cover is often missing in the portfolio of the average insurance buyer. This is surprising because a personal accident cover is not only useful but also very cheap. A cover of 10 lakh costs just about 500 a year. Yet, there are few takers for this essential cover. For every five inquiries that insurance portal Policybazaar.com receives for term insurance plans, there is just one person asking about personal accident cover.


What it covers Accident insurance covers not just road mishaps. It can be any accident--slipping on the stairs, falling from a height, breaking an ankle during a football match, receiving burns while bursting firecrackers on Diwali, or getting electrocuted by a faulty appliance. A comprehensive plan covers the policyholder against all such perils. The basic policy will cover him only for death, paying his family a lump sum in case of an eventuality. The cost of this base cover is very low at 500 a year for a cover of 10 lakh.

 

If the policyholder takes a cover against disability, the premium will be a little higher. How ever, he gets the coverage for any disability due to the accident. This can be partial or total, temporary or permanent. A fractured leg that prevents you from moving is a total disability, but temporary . A severed finger is a partial disability, but permanent. The payout will be different in both cases because the impact on the earning capacity of the person will vary.

 

The policy may also be extended to include medical expenses. Usually an add-on benefit with the basic policy, it pays for any hospitalisation as a result of an accident. However, the cover is a little different from that offered under a regular health insurance plan. A mediclaim policy is an indemnity plan that reimburses the hospitalisation expenses. A personal accident cover, on the other hand, will pay only for the treatment of injuries caused by an accident.


The payout under this head is about 10-25% of the base cover. So, if you have a 10 lakh cover, you can buy a medical extension of 1-2.5 lakh. What it costs Unlike other policies, the premium of a personal accident cover does not vary across ages.


However, your employment will have a bearing on the premium. The risk to your life and safety depends on the field of work you are in. A sedentary worker will have to pay a lower premium compared to a factory worker. For a comprehensive cover, Oriental Insurance charges 1,500 for a 10 lakh cover if you fall under the `normal' risk category, but if you are a `high risk' customer, the premium is higher at 2,250.
Rider or standalone policy Accident cover is available in many forms--as a rider with a life insurance policy, as an add-on policy to your motor insurance and home insurance, as a group insurance cover from your employer, and as a standalone plan. However, most riders with life insurance policies provide only a basic accidental death and permanent disability protection. Ask Mohnish Gupta, a Delhi-based businessman, who lost his finger in an accident. His accidental death and dismemberment rider from the life insurance company did not pay him a penny. The terms and conditions of the policy said it would pay only if the whole hand was dismembered.

On the other hand, a standalone comprehensive policy covers various kinds of losses, including income loss, temporary disablement and hospitalisation. They are not only more comprehensive, but can also be customised for the buyer. Also, the cover offered by a rider is linked to the base sum assured and cannot exceed a certain level. If you have taken a term plan of 50 lakh, the rider will not give you a cover of more than 25-30 lakh.


How and where to buy The low ticket size of a personal accident policy means no one wants to sell you one. Some insurance agents tag it along with a life or car insurance policy. Banks sell it when you open an account or get a credit card. If you are price conscious, PSU insurance companies offer the best value. For instance, while a 5 lakh death and disability cover from a PSU insurance costs `985, a similar plan from a private insurer comes for 1,500. PSU insurers also offer greater customisation, allowing you to keep or drop a particular benefit. In comparison, private insurers are more rigid about product packaging.

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