Personal Accident Insurance Cover and Its Importance

Road accidents in India take over 130,000 lives each year. This means 12 Indians would have died in a road accident by the time you finish reading this blog.

A recent article in the Zee News website claims that a study conducted of the Centralized Accident and Trauma Services (CATS) system revealed that CATS did not respond to 28% of the calls received by it. This is hugely worrying because this unit was created for the purpose of providing much needed support to accident victims in the first 20 minutes of the incident.

Personal Accident Plan

The personal accident insurance policy is an inexpensive plan that offers multiple benefits to the insured in the event of an accident. This includes -

1. Compensation to nominee in the event of Accidental Death (AD)

2. Compensation to insured person in the event of Permanent Total Disability (PTD)

3. Compensation to insured person in the event of Partial Permanent Disability (PPD)

4. Hospital cash allowance

5. Medical expenses

... and some variants of the above benefits.

I always view a personal accident insurance plan as a financial support structure for the insured in case he/she meets with an accident. This support structure includes hospitalization expenses, loss of income and other expenses at time of recuperation. I never look at the Personal Accident plan for it’s accidental death benefit only as “death” fits into a life insurance framework and is supported in the life insurance plan.

Important points to note before purchasing a personal accident policy

1. Research well

I will always recommend that research of insurance plans should be done on the insurer websites and not on insurance aggregator websites. That's because, the insurers have a greater responsibility towards the content built on their website as compared to aggregators. While aggregators (who are largely to promote insurance sales) might omit certain key clauses - intentionally or unintentionally.

Also, personal accident policies sell well on online or tele-marketing because of the incomplex nature of the product. For consumers too, these direct models offer great convenience and I advocate the use of these distribution methods for such policies. However, I would recommend that these products should be bought only from those direct marketers who can share an insurance company approved document which enlists the benefits offered, sum insured, exclusions and premium. In other words, the distributor should be able to give a) policy wording, b) company brochure, c) premium table and d) insurance company sales manager name/contact on email. This email should further be CC-ed to the sales manager given in point d).

How are PA policies mis-represented by agents?

I recently received a call from a telecaller pitching a personal accident policy that gives a sum insured of Rs. 34 lacs at a premium of Rs. 5,000. On sterner questioning, I found that the telecaller had added all benefits to reach Rs. 34 lacs. For example - he added Rs. 10 lacs of AD cover plus Rs. 10 lacs of PTD cover plus 4 lacs of accidental medical expenses etc. to make it Rs. 34 lacs. This is nothing but misrepresentation of facts. (it’s a bit like saying, on a roll of a die, if you roll 5 I will give you 100 rupees. However if had rolled a 1, then I will give you 200 rupees. So 100 plus 200 .. you can earn Rs. 300. This is stupid because on the same die, we cant get two numbers) 

2. Benefits offered by Personal Accident Plans

Accidental death (AD) should never be the only criteria in you opting for a personal accident plan. Other than AD, there are 4 other benefits that are important and should be considered while choosing a personal accident plan -

a) Permanent Total Disability (PTD)

b) Partial Permanent Disability (PPD)

c) Hospital confinement allowance (also called Hospital Cash)

d) Accident medical expenses

The definition of all the above points (including AD) is given in the policy wordings of each insurer’s Personal Accident policy. Please do read the policy wording as each insurance company is allowed to define the benefit in the manner they choose to.

Permanent Total Disability (PTD)

PTD means a disability that will remain with a person throughout his/her lifetime and that he/she will mostly not recover from it i.e. it will continue indefinitely. Insurance companies normally define it as loss of both eyes or, loss of both hands or legs and, even paralysis of body. Some insurers also make define it in terms of the insured’s employability wherein the disability that results in absence from work for 6 or 12 months without any expectation of returning to work.

Partial Permanent Disability (PPD)

PPD is often defined in a policy schedule as a %. For example – if the insured were to loss the sight in one eye due to an accident, he/she will be compensated with 50% of the sum insured. Insurers have a list of 20-22 such instances with specific % for each event like the loss of one finger, loss of one hand, loss of hearing etc. In the event of an accident, a PPD has a higher frequency as compared to an AD or PTD  - so this is quite an important feature.

Hospital Confinement (or Hospital Cash)

Insurers often offer this benefit. Hospital Cash is a fixed allowance given after a certain number of days, for each day of hospitalization, for a fixed number of days. Let me illustrate – an insurer might say – You will get Rs. 1000 per day after the first 3 days as an in-patient in a hospital, for a maximum of 20 days. This means – if due to an accident, you are hospitalized for x days, then you are entitled to [max[(x - 3 days), 20] * 1000 rupees]. In this case, it is [max(15-3), 20]*1000] or 12*1000 or Rs. 12,000.

Accident Medical expenses

This is a key benefit and I would recommend that every insured should look for this benefit while availing insurance. This benefit is aimed at indenifying the medical expenses incurred by the insured in the event of an accident. Please make certain from the insurer if this is applicable for only in-patient medical expenses or also applicable in case of out-patient. Go for an insurance policy that also allows out-patient medical expenses because it will widen your scope and security net in case of accidents.

3. Comparison between Insurance Companies


I browsed through the website of some insurers and my reseach has led to –

o   ICICI Lombard's personal accident plan that is available on the internet offers only AD and PTD benefit. There is no PPD, Hospital confinement or Accident Medical expenses.

o   Bajaj Allianz’s Personal Guard has 3 different Personal Accident plans. The comprehensive PA plan offers AD, PTD, PPD, hospital confinement and medical expenses. (this qualifies under my consideration set)

o   TATA AIG’s Accident Guard offers only AD and PTD. There is no PPD, hospital confinement and no medical expenses

o   Bharti AXA General Insurance’s Smart Individual Personal Accident plan offers a host of benefits including AD, PTD, PPD, TTD, Hospital confinement, Accident medical expenses etc. (this also qualifies under my consideration set)

o   Apollo Munich is not offering the PA plans on their website.

4. Premiums

Bajaj Allianz and Bharti AXA’s benefit table is not exactly the same. Prospects are advised to go through the benefit table of both insurers. (click here for Bajaj Allianz and click here for Bharti AXA)

Bajaj Allianz has not given a premium calculator on their website. They have given a rating table but it is a bit difficult to calculate premiums this way.

Bharti AXA’s premium for different plans is attached below (from their website as on Feb 10^th 2012) –

• Rs. 5,00,000 Smart PA Standard – Premium of Rs. 736 (incl taxes)
• Rs. 10,00,000 Smart PA Silver – Premium of Rs. 1,816 (incl taxes)
• Rs. 20,00,000 Smart PA Gold – Premium of Rs. 3,480 (incl taxes)

I believe these belong to risk occupation I. I have picked these premium for a 32 year old individual living in Bangalore.  

5. Claim process

Bajaj is a popular brand when it comes to speed of settling claims. Their website claims to process claims within 7 days of receiving all the documents.

One area you have to consider is the time within which a claim has to be reported. Bajaj Allianz requires you to report the claims within 14 days of the death or disability etc. due to an accident, as per their website. This seems a bit tight, so lets look at Bharti AXA’s claim process.

Bharti AXA’s website doesn’t give much details on how to claim in case of a PA policy. However on examination of their policy wording, the section of “Time limit for making a claim” (Page 6 of Personal Accident policy wording) allows upto 12 months to make the claim in writing to the insurer.

Prospects should read the claims process of insurers as it will help them all ‘hassles’ later.

Overall, I would recommend a personal accident plan for all individuals between 20 to 50 years of age. It is inexpensive and extremely useful in case accidents might happen.


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