Buy A Basic Accident Cover First, Then Shop For add-Ons

Personal accident policies are not just about cover against accidental death or loss of limbs anymore. These days, many non-life insurance companies are offering feature-rich covers and high sum assured on these policies. According to insurance experts, many of these are really useful to customers. Consider, for example, the high sum assured of Rs5 crore or a feature like modification of house after the mishap to make it more suitable for living. They can prove to be invaluable to customers.

But, the only trouble is that these additional features have a hefty premium, say experts. So, many of them are asking individuals to go for basic policy first and then consider adding useful features to it if they have the resources.

“Personal accident insurance offering accidental death, permanent total disability, for a sum assured of at least 10 times annual income is a must. Plans with more features can be bought if the budget permits and if an individual needs,” says Sanjay Datta, chief — underwriting and claims, ICICI Lombard General Insurance. Mukund Seshadri, founder partner, MSV Financial Planners says, “Ideally one should have a feature-rich policy, but most people do not have their finances in place. It is better to buy a basic personal accident insurance cover first.”


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

Though the bouquet of benefits looks good, 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 secured at Rs1,100-1,200 per year, TTD benefits may cost almost 50% more than the basic plan. If more features such as accidental medical expenses benefit are added, you may have to pay 10% to 30% more. The final number keeps increasing as you keep adding the features to the basic plan.

While the cost should have a bearing on the buying decision, one should not altogether avoid extra features or high sum assured, say experts. “Your approach to buying personal accident insurance cover should be —first buy a basic cover; if you have money go for more features, and if your budget still permits, go for a high sum assured,” says Sudhir Sarnobat, CEO, medimanage.com, a health insurance advisory. For example, an individual with an annual income of Rs5 lakh should have a basic accident insurance plan for a sum assured of Rs50 lakh.

If he can afford to spend more, more features can be looked at. “While shopping for additional features, individuals must decide using two factors — what is the possibility of the insured meeting with a risk arising out of an accident and how much benefit would be paid by the insurance company,” adds Sarnobat. For example, a salaried individual working as an office staff, who has a ‘paid leave’ offered by his employer, may ignore buying TTD benefit.

He may not be in the high risk zone and can 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 should be buying a weekly benefit for TTD. “You have to look at each benefit in absolute terms, too. Some of these benefits may be irrelevant in some cases,” says an actuary who does not wish to be identified.

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 capped at lower of Rs1 lakh or 10% of sum assured.