The Insurance Regulatory and Development Authority of India (Irdai) has constituted a working group to deliberate on the concept of periodic payment of the insurance claim amount in case of personal accident insurance and defined benefit health insurance plans. Defined benefit health plans pay a lump sum to the policyholders in the event of the insured ailment or medical procedure. A critical plan, for instance, is a defined benefit health plan, whereas the regular health insurance plan that you buy is an indemnity product as it only pays for the hospital bills and not a pre-decided or a defined amount.

Personal accident is also a defined benefit plan that pays a pre-determined sum assured in the event of death or disability. But instead of paying a lump sum, if the policy is allowed to pay the claim benefits in instalments, the beneficiary can make better use of the payments over an extended period of time. 

In life insurance, term insurance plans popularly break up the claim benefit as periodic instalments so that the chances of misuse are minimal and beneficiaries get the money over an extended period of time. The same concept is now being mulled for defined benefit policies such as a personal accident insurance, but what is a personal accident policy? 

What is IT?

A personal accident policy insures you against death, permanent total disability, permanent partial disability and temporary total disability in case of an accident. Typically, on death and permanent total disability, the policy pays the sum assured and terminates thereafter.

In case of permanent partial disability, the policy pays a percentage of the sum assured depending upon the severity of the disablement, whereas in the case of temporary total disability, the policy provides weekly 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, your income and profession determine the maximum cover that you can get and the premium that you will need to pay. Typically, the maximum cover you can get is 10 times your annual income and the premium is decided by your profession. The riskier the profession, the more expensive is the policy.

Personal accident policies often come as bundled covers along with credit cards or as riders with life insurance policies. In case of auto insurance, for instance, personal accident cover is mandatory, although it covers accidents only when they happen at the time the policyholder is in the vehicle. You can also opt for it while taking home insurance.

How to make a claim

In case of death, your beneficiary will need to submit the death certificate mentioning the cause of death. In case of permanent disability also you will need a medical certificate.

In the case of temporary disability, in addition to the medical certificate, the insurer will also need an absent from work certificate from the employer given that personal accident policy is meant to act as an income supplement plan since a disability will impair your ability to work.