You cannot pre-empt an accident, but you do know that it can do any of the following: claim your life, land you in a hospital or leave you disabled.
While a term insurance policy will take care of providing for your dependants on your death and a health insurance policy will pay for hospital bills; you need insurance for loss of income as well due to a disability that may impair your ability to work.
This is where a personal accident insurance comes in. It offers financial compensation not only in the event of death due to an accident but it also covers an accident that may leave you permanently or temporarily disabled.
What Accident Insurance covers
A personal accident policy consists of four primary covers that insures you against death, permanent disability, permanent partial disability and temporary total disability.
In the case of death, this policy pays the total amount assured as a lump sum.
In the case of permanent total disability, typically the policy pays the sum assured. Some policies may pay a higher amount than others. The policy terminates thereafter.
In case of permanent partial disability, the policy pays a percentage of the sum assured depending upon the severity of the disablement.
In the case of temporary total disability, the policy provides weekly compensation. The benefit usually is 1% of the sum insured and is paid weekly for up to 100 weeks, up to a cap defined by the insurer. Some of the newer products can also give a higher compensation. Usually in the case of permanent partial disability and temporary total disability, the policy is renewable.
Since a personal accident policy is seen as an income protection plan, how much personal accident cover you can buy will depend on your annual income. Typically, insurers allow you a sum assured up to 10 times your annual income.
What Accident Insurance costs
Your income and profession determine the maximum personal accident cover that you can get and the premium that you need to pay. For instance, a pilot will pay a higher premium than a corporate employee because his profession would be seen as riskier.
Other than this, personal accident policies these days come with a lot of add-on features that are in-built into the policy itself.
These add-on features may include: payment of ambulance charges, payment for modification of home or vehicle, payment of equated monthly instalments (EMIs), payment for children's education, and family transportation.
The premiums would depend on these features too, so read the policy brochure carefully to understand what all the policy offers you.
A basic personal accident policy is quite affordable. The premium could range between Rs 1,500 and Rs 3,000 for a Rs 10 lakh cover that includes all the four covers. Remember how much you pay will also depend on the profession.
Personal accident policies can be bought individually and they also come bundled with other financial products.
However, make sure that you read the policy document carefully and ensure that you are buying at least all of the four covers, namely: death, permanent disability, permanent partial disability as well as temporary total disability.
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