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After the standardization of health and term policies, the Insurance Regulatory and Development Authority of India (IRDAI) recently came out with a draft proposal on a standard personal accident policy. The policy proposes to pay out claims in the case of death or disability due to accidents, and not natural causes.

At present, the insurance market has a wide variety of personal accident covers. Since each policy comes with its unique features, it becomes difficult for buyers to identify a plan that suits them. To have a standard product with common coverage and policy wordings across the industry, the regulator, under the exposure draft issued on 9 December, decided to mandate all general and health insurers to offer the standard personal accident insurance policy, which will come into effect from April 2021.

Under the base cover, the policy will cover death, permanent total disablement and permanent partial disablement.
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Under the base cover, the policy will cover death, permanent total disablement and permanent partial disablement.


“The policy makes it easier for buyers to choose the insurance company, as the terms and conditions remain uniform, and only the premium varies. Currently, customers have to evaluate various personal accident plans, for which they have to go through multiple policy documents, which can get laborious," said Mrin Agarwal, founder, Finsafe India Pvt. Ltd, and co-founder of Womantra.

Let’s take a closer look at the key benefits and whether you should go for it.

What is covered?

Under the base cover, the policy will cover death, permanent total disablement and permanent partial disablement. In case the policyholder dies or suffers total disablement directly due to an accident, the policy will pay out 100% of the sum insured. For instance, if the insured suffers total and irrecoverable loss of both eyes or physical separation or loss of use of both hands or feet, he or she will get 100% compensation.

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However, in the case of permanent partial disablement, the policy will pay the sum insured in a specified manner. For example, the loss of use of one entire hand or foot or both ears or sight of one eye will entitle the policyholder to 50% of the sum insured. If he or she suffers a loss of all toes or one ear, 20% of the sum insured will be paid out.

Insurers can also offer optional covers along with the base plan, which will provide coverage for temporary total disablement, education grant for dependent children and hospitalization expenses. Insurers can charge extra premium for additional benefits.

Hospitalization expenses: Under this add-on, the policy will cover hospitalization expenses arising due to an accident. This will be indemnified up to the limit of 10% of the base sum insured.

Temporary total disablement: Policyholders can also opt for temporary total disablement as an add-on with the standard policy. In such a case, if policyholders sustain an injury in an accident which completely disables them from engaging in any employment that they were capable of performing at the time of the accident, compensation will be paid at the rate of 1% of the base sum insured per week for up to 100 weeks, till the time the insured can return to work.

Education benefit: In the case of death or permanent total disability, the policy will provide a one-time grant of 10% of the base sum insured to a maximum of two dependent children provided they are not more than 25 years of age and are pursuing an educational course as a full-time student in an educational institution. “The add-ons make this policy attractive. The standard term, health and accident covers can lead to more people buying them as they reduce complexity in the decision-making process," said Agarwal.

Expert take

“The cover does not only pay at the time of death of the policyholder but also provides financial security to the family in the event of an accident. It curtails financial constraint that may arise due to income loss," said Amit Chhabra, head, health insurance, Policybazaar.com, an online marketplace for insurance.

This way, a standard cover can be important, especially for the breadwinner of the family.

However, according to experts, as features of the standard personal accident policy will be same across insurers, individuals must do a price comparison when buying this cover as that will be the primary difference among the insurers. “Individuals could buy from the insurers with the lowest price but with a claim settlement ratio of over 90%," said Chandan D. S. Dang, executive director, SecureNow.in, a Delhi-based online insurance broking firm.

Claim settlement ratio is the total number of claims paid out by an insurer in a year against the number of claims received.

Accidents can cause temporary or permanent disablement, resulting in the loss of income. The need for personal accident arises from the fact that life insurance companies offer financial security only in case of death of the policyholder and health insurance takes care of the hospitalization expenses.

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