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Prioritize by Purchasing a Basic Accident Cover First and Add-Ons Later

Personal accident insurance offering accidental death, permanent total disability, for a sum assured that is at least 10 times annual income is a must

Personal accident policies are no longer limited to protection against accidental death or loss of limbs. Presently, a lot of non-life insurance companies are providing highly enhanced covers and high sum assured on these policies. As per insurance experts, many of these are quite useful to customers. Consider, for instance, the high sum assured of Rs. 5 Crore or a feature like modification of house after the accident to make it more suitable for living.

These additional features have a huge premium, say experts. So, many of them advise individuals to opt for a basic policy first and then consider upgrading it if they have the resources.

Personal accident insurance offering accidental death, permanent total disability, for a sum assured that is at least 10 times annual income is a must. Plans with more features can be purchased if they fit in the budget and if the need to buy them arises. Ideally one must possess a feature-rich policy, but most people do not have them enough funds in place. It is preferable to buy a basic personal accident insurance cover first.

Personal accident insurance plans become a saviour when one meets with an accident. Such policies cover one against accidental death, permanent total disability (PTD), permanent partial disability (PPD). They also promise to pay a weekly benefit of a fixed sum in case of temporary total disability (TTD). While some plans pay a fixed sum for broken bones, modification to the house, transportation of family and for buying blood, several others pay for medical expenses arising out of an accident.

Though the plethora of benefits appears to be useful, each of these comes at a cost. For example, while the basic plan that offers accidental death, PTD and PPD benefit for a sum assured of Rs10 Lakh can be possessed at Rs. 1,100-1,200 per year, TTD benefits may be almost 50% more costly than the basic plan. If more features such as accidental medical expenses benefit are added, you may have to shell out 10% to 30% more. The final count keeps rising as you keep loading the features to the basic plan.

While the cost may alter the buying decision, one should not straight away avoid extra features or high sum assured, say experts. Your priority to buying personal accident insurance cover should be —first buy a basic cover; if you are left with some more money go for extra features, and if your budget still permits, go for a higher sum assured. For example, an individual earning Rs. 5 Lakh annually should have a basic accident insurance plan for a sum assured of Rs. 15 Lakh.

If he can afford to spend more, more features can be considered. While looking for additional features, individuals must make a decision using two factors — what is the chance of the insured meeting with a risk arising due to an accident and how much amount would be paid by the insurance company. For example, an earning individual working as an office staff, which has a 'paid leave' offered by his employer, may overlook buying TTD benefit.

He may not fall in the high-risk zone and might afford to stay at home for four weeks due to TTD arising out of an accident. Compare him with a self-employed professional, who may be travelling a lot and doesn't have a 'paid leave', he needs to buy a weekly benefit for TTD. "You have to look at each benefit in absolute terms, too. Some of these benefits may seem irrelevant in some cases.

For example, transportation of family benefit is useless if you do not have a family, or you always travel with your family. Also, each of these add-on benefits has sub-limit. House or vehicle modification expense is subsidized at lower of Rs. 1 Lakh or 10% of sum assured.

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