Insurance, in general, is often misunderstood by you and me as consumers. Most of the time we only hear about the bad insurance experiences. Among the various types of insurance policies, personal accident insurance is perhaps the most misunderstood and underappreciated insurance, despite being designed with a user-friendly name.
So, what exactly is personal accident protection insurance and how does it protect you if you have one? Here’s a quick primer to explain everything you need to know about personal accident insurance
What is personal accident insurance?
Personal accidents can have serious health repercussions that can disrupt your family’s life in many ways. Thus, personal accident insurance is an insurance plan that provides financial protection for you and your family if you ever meet with an accident. It provides your family with financial support in serious accident cases where you die or become disabled due to the accident.
For starters, if you pass away from because of an accident, your family will receive a payout from your insurer. Your insurer will have to make a lump sum payment to your family as contracted by the personal accident insurance.
Protection against disability
Partial, temporary and total permanent disabilities are also common health consequences of an accident. These disabilities are also covered by a personal accident insurance if you have one.
The most serious consequence of personal accident that you want insurance against is total and permanent disability. For example, if you lose two of your limbs, your ability to see or your ability to hear because of an accident, you will be able to make claims against your insurer for permanent disability.
A combination of any two limb or organs will be classified as total disability by most insurers. In the event of permanent disability, you will receive a lump sum payment from your insurer.
If you only lose one limb or organ (or part of your limb/organ), you are considered as partially disabled. In cases of partial disability, you will receive a percentage of the sum assured instead of the whole sum assured. The amount you receive will also be dependent on the limb or organ that you lose in the accident.
Income replacement for temporary disability
In some cases, you might become disabled for a temporary period, which is defined by insurers as temporary disability. Unlike total or partial permanent disability, personal accident insurance offers a different kind of financial protection for temporary disability. Instead of receiving a lump sum payment, your insurer will provide you with weekly cash payout until you are able to return to work again. This is an income benefit that is given if you are unable to work for the time being due to an accident resulting in injury.
Safeguard against medical expenses, temporary loss of income during hospitalisation
With a personal accident insurance, you also get coverage for medical expenses arising from an accident. Some personal accident insurance even covers the medical expenses if you meet with an accident overseas. While you are in the hospital, you will also receive a daily hospital cash benefit, i.e. a daily allowance for each day you spend in the hospital.
Why you should get a personal accident insurance?
Personal accidents: Low odds but it comes with expensive repercussions
Most people don’t think that accidents will happen to them. Each year there are only about 7,500 traffic accidents resulting in injuries. With a population of 5.6 million people, your odds of being in an accident is only 0.00001339%. While the odds of an accident may be low, the repercussions of an accident are life-and-death. You face the risk of losing your ability to live as a human being. You might need either your family or a caretaker to take care of you. At the same time, your family also loses its source of income.
Increasing risk of accidents as more PMDs get on the road
Recently, traffic accidents involving Personal Mobility Devices (PMDs) are on the rise. With more PMDs on the road, there is a high chance of you being in an accident. Even if you are a careful pedestrian, you can’t be certain that the PMD rider is as careful as you are.
Unfamiliar and accident-prone environment while travelling
Travelling has always been one of the top recreations for Singaporeans. On average, a Singaporean leaves the country for a holiday two to three times a year. What about the overseas work trips that you sometimes have to attend? There is often a higher risk of being in an accident when you are in a different and unfamiliar environment.
What are some considerations when you should make when getting a personal accident protection plan?
Get personal accident protection with a term life insurance for a better deal
Term life insurance offers you the option to add on a personal accident rider to your base plan. Riders are generally much cheaper than standalone plans (e.g. personal accident protection plan) as there are less associated administrative costs. Thus, if you have yet to get a term life insurance plan, the best option is to get it together with your personal accident protection rider. For those of you who missed the opportunity to get your term life insurance and personal accident protection rider together, fret not. Standalone personal accident protection plans are still affordable for your wallet, especially considering the kind of protection that it offers.
Reading AND understanding the fine print
Whenever you see the terms and conditions, you will probably skip it and just agree to the conditions. However, if there is ever any terms and conditions (T&Cs) that you must read, it is the T&Cs of a personal accident protection plan. A lack of understanding of the T&Cs can bring up unwanted disputes and might even lead to rejection of claims.
The reality is that different insurance companies have different exclusions under its T&Cs. It is important to know which are the circumstances that your policy does not cover. You mustn’t just take your financial advisor’s word for it. You might even want to ask them to point out which is the clause that specifies the protection that you are looking for.
Also check out these articles related to insurance:
- Insurance or Investment – Which Should You Get First?
- 7 Reasons Why Millennials Need Insurance and Should Get It Early
- Insurance 101: Beginner’s Guide to Integrated Shield Plans
- Insurance 101: Your Beginner’s Guide To Investment-Linked Plans (ILPs)
- Insurance 101: Beginner’s Guide to Understanding Term Life Insurance