Photo: iStockphoto
Photo: iStockphoto

Buying accidental death and disability policy a no-brainer

Personal accident insurance should ideally be the first policy you buy when you start earning

One Sunday morning, we received a message on one of the WhatsApp groups that a young colleague, never known for rash driving, had died in an accident. While the entire organisation was mourning, some of us were revalidating our belief about the importance of an unassuming accident and disability insurance cover.

While family and friends will provide more than the required emotional support, without an accident insurance cover, it would take ages for a modest family to cope with the financial shake-up of losing a primary earning member. It does not require great mathematical skills to calculate how a major disability or death can devastate a family and its long-term plans.

A disability can create a major dent in your income. Buying an affordable personal accident insurance that will cover this serious financial risk is therefore a no-brainer. Of course, you would almost never hear of this product from your banker or agent, thanks to the low premium as well as the low commission this product offers. For instance, a 20-lakh policy covering an individual should cost around 250 a month. These are the things you should know before buying a policy:

Know the policy: Personal accident insurance is a policy that makes available cash to the nominee or person insured in case of death or disability of the person who is covered. Claim payments are not linked to the expenses incurred. It is paid as a lump sum, based on the degree of disability mentioned in the policy document.

Understand the cover: Personal accident policies try to insulate you from the financial risk of accidents, with a comprehensive cover. It covers accidents such as a slip in the bathroom, sport injuries, road accidents, stampedes, terror attacks, murders and natural calamities. Comprehensive policies also cover disabilities such as breakage of bones to permanent disabilities – both partial or total and temporary total disabilities that force you to be bed-ridden. They provide allied coverages for house or vehicle modification and evacuation. They cover accidents across the world. You must always compare the benefits, and go for the most comprehensive one.

Be careful of exclusions: Of course, when you sign up, you need to be clear about the standard exclusions in any insurance policy. For instance, standard accident policies will not cover adventure sports, illegal activities such as drink driving, war-related injuries or self-inflicted injuries.

Know the right time: Personal accident insurance should ideally be the first policy you buy when you start earning. At a young age, the risk of accident is higher, especially if you use a two-wheeler for regular commute or travel by public transport. You must buy a cover that is at least 10 to 15 times your annual income. The policy should ensure you and your family are adequately covered for living expenses against death or any permanent, partial or temporary loss of income.

Mahavir Chopra is director health, life and travel insurance,