Life insurance covers the risk of death; health insurance covers the risk of sickness; where as personal accident insurance covers the risk associated with accidents. If the life assured is seriously  injured in an accident and disabled either temporarily or permanently, he/she will not able to work and earn. To minimise the financial hardship of the life assured and his/her family members, the personal accident insurance provides the financial support. So personal accident insurance is very essential and Life insurance cover without personal accident cover is inadequate from risk management point of view.

The personal accident policy provides compensation in event of insured sustaining injuries solely and directly from an accident caused by violence, visible and external means, resulting in to death or disablement be it temporary or permanent.

Risks Covered:

Personal accident insurance policies are the domain of general insurance companies. They are issued for one year and renewed annually thereafter .But nowadays personal accident benefits are also being offered as riders by Life Insurance Companies and policies are issued for longer term like any other life insurance policies.

The sum assured is payable in the event of death due to accident. It also provides monetary payouts in case of disability-both temporary and permanent nature. Personal accident insurance policy is very important for a victim who suffers injury in the accident because it provides an alternative income, if the victim is unable to work.

Pricing:

1.  Occupational Classification:

There are three types of risk classification of the insured person under personal accident insurance i.e normal risk, medium risk, and heavy risk persons. Higher premium is charged for higher risk category insured. The normal risk insured includes persons engaged in administrative functions such as doctors, lawyers, accountants, bankers and teachers etc. Heavy risk persons are those who are working in underground mines, circus, horse racing, mountaineering, skiing, ice skating, river rafting, hand gliding etc.  Medium risk persons are those who are engaged in manual labours or supervision of manual labours excepting those falling under heavy risk category persons. They include builders, contractors, engineers engaged in      supervision of construction activities, professional athletics and sportspersons.

2.  Income Criteria

The income of the insured person is a major factor in determining the maximum sum assured under the policy. Since the monetary payouts in case of disability is aimed at  providing an alternate source of income, the income generating capacity of the insured person is taken into account in validating the sum assured. Generally Sum assured is taken as   60- 100 times the monthly income.

3.  Group Discount

Insurers provide group discounts when policies are issued to a group of persons with similar risk category. Even discounts are offered if policies are taken by the family members together.

Benefits:

• Accidental Death

In case of accidental death, the nominee or legal heir will get the sum assured under the policy

• Permanent Total Disablement (PTD)

If an insured person suffers from an accident which result in his/her Permanent Total Disability, the percentage of sum insured is paid as follows.

Loss of two limbs                                             : 100% sum assured

Loss of one limb & eye                                    : 100% sum assured

Complete loss of sight of both the eyes      : 100% sum assured

Complete loss of speech and hearing         : 100% sum assured

• Permanent Partial Disablement (PPD)

If an insured person suffers from an accident which results in Permanent Partial Disablement and there is no reasonable medical hope of improvement i.e loss of an arm or a leg or an eye or hearing in an ear or any other disablement defined as PPD as per the policy in force, then a certain percentage of the sum assured is payable to the life assured. It ranges from 5% to 50%.

• Temporary Total Disablement (TTD)

If the insured person suffers from an accident which causes a Temporary Disability and it  completely prevent him/her from performing daily duties pertaining to his/her employment or occupation, then a weekly benefit (usually 1% of sum assured) to compensate the loss of income for a period not exceeding 100 weeks are payable to the life assured.

• Benefits without payment of additional premium.

Certain benefits under personal accident insurance policy are paid without paying additional premium. Such benefits are reimbursement of expenses incurred on carriage of dead body, children’s education fund (maximum of 50 % of the sum assured each for 2 children) and cumulative bonus etc.

• Benefits on payment of additional premium.

Certain benefits are covered by payment of additional premium such as reimbursement of medical expenses incurred for hospitalisation of the life assured, reimbursement of actual expenses incurred in purchasing blood through a hospital or blood bank, transportation of family members from the accident site to the hospital, cost of imported medicines and modification of resident vehicle etc.

Exclusions

The benefits under the personal accident policies does not cover
death, injury or disablement of insured person arising out of Sickness, intentional self-injury, suicide or attempted suicide, acts under the influence of intoxicating liquor or drugs, arising or resulting from the Insured committing any breach of the law with criminal intent, childbirth or pregnancy or in consequence thereof, war, enemy action, rebellion etc, nuclear accidents, change of occupation etc.

Conclusion

Personal accident policy premiums are much lower in comparison to the term life insurance   or health insurance premiums. Further in view of the misery and financial hardship of the surviving insured after the accident, taking a personal accident cover is a necessity and should take precedence over life and health insurance cover.