I was quite thrilled to be able to "advise" folks on accident and disability insurance. I think this is a section people are completely unware of. For my convenience, I will call it PAIP(Personal Accident Insurance Policy). SI stands for Sum Insured.
This is a pure risk insurance covering only accidental deaths - if you survive, you get nothing. So you pay the money for the peace of mind that your dependents wont starve if you die in an accident. Or better still, if you get disabled in an accident, money wont be much of a constraint.
This is a policy that covers only accidental deaths, which mean that death due to sickness is NOT COVERED. So this becomes a subset of term cover, since term cover covers all types of death. Since the scope is limited to only accidents, and since the probability of that happening is quite less compared to a normal death, the premiums are also correspondingly low. Typical premium to cover only death is 50 rs per lakh. That is one crore cover in only 5000 rs per year!
Accidental death is defined as any death where there is external marks of injury. like road accidents, snake bite, drowning et al.
Currently PAIP is offered by National Insurance and other PSU insureres, Reliance General, Tata AIG, Bajaj, ICICI and others. You get the lowest rates from National, of course.
Other than covering death by accident, it also, thankfully, has an option where one can cover for permanent disability arising out of accident. So you necessarily don't have to die to get some benefit out of this. The insurers have a table of dire things that can happen for which they will pay you a percentage of Sum Insured in the permanent disability section. This costs 5 rupees more per lakh than the death cover. The table of maladies include losing both hands, legs, eyes etc. very unpleasant things to mention. There are even percentages of SI for smaller disasters like losing 5 fingers etc.
Apart from that, there are sections called Permanent Partial Disability and Temporary Permanent disability. TPD premiums are higher, upto 150 rs per lakh for type 1 folks. This is because the company pays upto 1% of Sum Insured(in TPD, max sum insured is only 5 lacs) per WEEK of disablement. For example, you have an accident and broke a few bones. The company pays you 5000 per week, since you cannot go to work. They will pay this 1% of SI(5000 rupees for a 5 lakhs SI in TPD section) for a maximum of 104 weeks(two full years).
Please produce proof of income, esp for the TPD part of the policy. The company does not want you to make profit out of your sickness.
One more good thing is that for every unclaimed year, your SI increases by 5% every year, upto a max of 50%.
Like all policies, choose the right nominees. Also, let them know that they are the nominees so that they can raise a claim when the unpleasant thing happens. If they dont make a claim, company is obliged to pay nothing. It will be a good idea to let them know where the original policy documents are present. Also, take xerox copies of the originals and give to a close friend and tell him that so and so is your nominee.
One of the good things about this is there is no medical test required to obtain the cover. So age is no matter, since you are covering only for accidents.
Some insurers, mostly PSU, give you the option of covering accidental hospitalisation expense to 10% of SI or 40% of claim if you pay 20 percent more premium. Nice deal, isn't it?
Please ask your nominees to be prepared to run to the police station to get FIR. Death certificate also needs to be produced. Sometimes post mortem may also be required. Ensure that you discuss all this with your nominee,
*ALTERNATIVES:
*Tata AIG at least talks about a plan called Secure Future. In this one, in case of accident, you dont pay the nominee a lump sum. because usually they wont know how to use the lumpsum wisely. So you provide a regular sum per month for a fixed amount of time. For example, for 5400 Rs per year, Tata AIG will give 35000 per month to your nominee for 10 years! But there is no inflation linked hike in the money paid.
WHERE DOES IT COVER?
No geographical limits - the policy is applicable anywhere on earth.
*CATEGORY OF RISKS:
*The company categorises people into three. type 1, 2 and 3. Type 1 is the LEAST risk, that is people who are most UNLIKELY to have an accident. Desk job folks, administrative functions, bankers, teachers, software engineers all fall in this category.
Type 2 are moderate risk. Builders, Engineers in superitending functions, contractors, veterinary docs, paid drivers fall in this category.
Type 3 is HIGH risk. Mining, Explosive handling, drivers of heavy vehicles, mechanics fall in this one.
*COSTS:
*I will consider type 1 or the lowest risk category people, basically administrative staff, IT and software folks and others. who do desk jobs. You can get all the details in national insurance website, https://nationalinsuranceindia.com.
In National, the cost without service tax for Only death is 40 rs per lakh. With permanent total disability option added, it is 45 rs per lakh. Reliance charges 70 rs per lakh for death+ PTD. However, Reliance offers cover for upto 100 times one's monthly income. So people with higher income who wishes to have more cover could split between national and reliance.
Other insurers typically have higher rates. I would recommend most people to go with National Insurance only. They take only 15 minutes to issue the policy once you give the income proof and the payment. For folks looking for much bigger covers, they can go with Reliance since they cover upto 100 times monthly income.
This is one of the cheapest covers that you can ever take. Imagine a cover of 1 crore for 5000 rs a year. Most people spend that kind of money on movies. A term cover for a 30 yr old person for a crore will at least cost 28000 rs per year upto age of 60.
If you take an accident cover as a rider in a pure term cover, it typically costs 150-200 rs per lakh. So always opt for a pure accident cover with ample amount of coverage - Riders are always more expensive.
This policy needs to be renewed annually.
Now do you know the reason why every tom dick and harry provides you with Accident cover for one lakh? It costs them only 45 rs per year! I recently had my newspaper vendor say that if I take the newspaper, I will have an accident cover of 1 lakh. Most folks are bound to be impressed!
TAX IMPLICATION:
For your nominee, nothing to worry about tax in case of a claim. If it is paid as a result of a claim, the amount is completely exempt from tax. This means, if you insure for 10 lakhs and if the claim is paid, nominee gets full 10 lakhs.
For the insured, you can claim section 80C benefits.
NOTE:
I am not an insurance agent or anything.
