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Why you must have accident and disability cover

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By ET Bureau

NEW DELHI: Data shows, in India, one serious road mishap occurs every minute and a person dies in an accident every four minutes. In light of these facts, the Supreme Court has recently appointed a three-member panel to monitor steps taken by the central and state governments to curb the growing number of accidents and ensure road safety.

"Road traffic accidents, therefore, have the potential of being one of the largest challenges to orderly human existence, necessitating immediate and urgent intervention," the apex court observed.

While the governments make new rules to keep you safe, it is your duty to be safe as well. One of the basic measures is buying a personal accident cover that would keep you financially secure in case of such a mishap.

Every accident may not lead to death. Some may end up in permanent or partial disability. The figures indicate that the cases of death due to accident in 2010 were lesser (1.3 lakh cases) than cases of serious injuries and amputation of limb (over 5 lakh).

Financial planners say it is more important to cover the later risks as such an event which will have a tremendous impact on the financials of an individual as well as the family. You may lose income and have to be provided for.

While a death is covered by any term policy, a personal accident plan also compensates for loss of income due to accident, permanent complete disability or permanent partial disability.

"A person who has been partially disabled post accident may not be able to work for certain months or is not able to work with the same efficiency which will reduce the family's income. In such a scenario, a personal accident cover plays a very important role," says Anil Rego, CEO and Founder, Right Horizon, a financial planning firm.

WHAT SHOULD BE YOUR SUM INSURED

Since, the idea is to compensate your income, choose a plan that provides coverage enabling you to maintain your current lifestyle even if you cannot earn. Companies can provide coverage up to 6 - 8 times of one's CTC. However, Rego says, "A cover equivalent to 2 - 3 times of one's CTC at a base level is sufficient."

Further, an accidental cover needs to be supplemented with term cover, so that one covers life risk, when death occurs due to causes other than an accident. "If one does not have sufficient term insurance, then you would need to increase the amount of accidental cover," says Rego.

"There could be personal aspects like frequent travel, especially out of the city, that would also require additional cover," adds Rego.

From time to time, like any other insurance policy, you need to review the cover size to ensure you have adequate protection. Factors like increase in number of dependents, financial liabilities like loans, change in expenses related to your lifestyle and salary have a direct relation with the sum insured. "It is good to review the same every 5 years," advises Rego.

WHICH PLAN TO BUY

One can choose to have a standalone or separate accident policy, or opt for accident cover riders while investing in other insurance policies. Go for the nominally priced add-on rider option if you are looking for basic protection. Otherwise, buy a standalone policy for a more comprehensive cover. "Riders attached with policies may not cover exclusively all the benefits, which a standalone will, and further bundling with another cover reduces flexibility if one wants to exit either the personal accident or the underlying life insurance," says Rego.

The sum insured depends on the cover size you choose and future earning capacity. Some insurers such as Future Generali and Apollo Munich also offer a 10% discount on premium if you include your family in the cover.
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