The insurance world or the financial advisor may not talk about disability policies at all, purely because the effort taken to sell may not result in proportionate earnings. However, the product can be very critical from your family’s point of view.
Your logical, procrastinating mind may argue that it is a low frequency risk – why worry? But remember, you do not take a financial cover for the frequency of the risk, but the impact.
Accidental disability can cause serious disruptions in life. By crippling our chances of earning a living and supporting our family, while paying for high medical costs, disability, in my view, takes a toll on families that is worse than even death, at times. A personal accident cover can help you stay prepared for such contingencies, providing financial relief so you can readjust to your new life, with ease.
A personal accident cover is a type of insurance policy that helps you overcome the financial loss due to accidental disability or death. The policy will provide your family with a lump-sum in case you suffer the loss of a body function in an accident, filling the financial gap caused due to the disability.
What kinds of accidents does a personal accident insurance policy cover?
When you hear the word accident, the picture you tend to draw would be that of a road accident. But, a personal accident covers a wide range of accidents. From slipping in the bathroom to workout injuries at the gym, from gas cylinder blasts to electric shocks, from drowning to fire injuries.
What kinds of disabilities does a Personal Accident Insurance policy cover?
When it comes to the kind of disabilities that the cover caters to, they can be classified into three types, as follows.
-Permanent Total Disability: This category of disability is when the person suffers serious injuries and a complete and long-term loss of an important body function. This could include situations such as:
-Complete blindness
-Loss of both hands
-Loss of both legs
-Loss of speech
-Loss of sanity
Usually, the policy pays 100 percent of the sum assured in case of a permanent total disability.
Permanent Partial Disability: This category is when the person suffers a permanent loss of a part or body functions.
For instance, the following are covered:
-Loss of one hand/ leg
-Loss of hearing
-Loss of sight in one eye
-Loss of a finger or a toe
In these cases, a percentage of the sum assured is paid. A list of these percentages is usually tabulated and communicated to you when you buy the policy. For example, if you lose hearing ability in both ears, 75 percent of the cover amount is paid, and if you lose vision in one eye, 50 percent of the cover amount is paid.
Temporary total disability: This category applies when the person is temporarily bed-ridden or immobile after an accident. In these cases, a weekly payment is made (usually 1 percent of the sum assured per week), throughout the duration of the disability.
In addition to these three categories, disability insurance often covers the risk of death as a result of an accident as well.
Who should get an accidental disability Cover?
Any person who is an earning member of a family should get a personal accident cover, to secure his/her family’s financial interests in case something unforeseen occurs. The cover will not only provide the means to get access to good treatment and recover, but also slightly unburden him/her financially.
Further, we recommend that you take a PA cover for all the domestic help and workers you employ such as maids, cooks and drivers, as they are exposed to higher risk, but wouldn’t have the financial backing to get treatment or to support their families should something happen to them.
How is the premium calculated?
The premium is dependent on your occupation and the cover amount you choose. Certain jobs are categorised as having high-risk environments and being accident-prone – in such roles, your premium amounts will be higher than those with safer jobs. So, with all other things being the same a software engineer will pay a lower premium than would a construction contractor.
How much cover do you need?
While the thumb-rule is to take a cover that is 15-20 times your annual salary, you must ensure that your family can live comfortably at all times. The appropriate amount can be calculated by subtracting the corpus you need to take care of all your current and future financial liabilities (loans etc.) and responsibilities (child education, marriage) minus the corpus (existing investments) and insurance you already own.
A Personal Accident cover is a very effective insurance plan that helps you stay prepared for the risk of living everyday life. It is not very expensive. I strongly suggest that you take a cover for all earning members of your family, and live life to the fullest!
(The writer is founder, Beshak.org, a consumer awareness platform for insurance)
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