What is personal accident insurance cover ?

Amongst all your must have insurance policies, personal accident insurance cover or personal accident insurance policy stands out as important as the others, namely term insurance and medical insurance.

If you don’t have one, your financial planning could go haywire. Imagine you commute to work in a two wheeler and are knocked down by a speeding vehicle that results in your hospitalization for 6 months or god forbid, some form of disability.

For no fault of yours, you would have to not only spent a great deal on medical expenses in the hospital, you would have also lost your income in the process as you can no longer attend work.

Thankfully, there is a insurance policy for your rescue.

Basic concepts

Term insurance is an insurance cover you take to transfer the risk on your life to the insurance company. If you are  no longer around, the insurance company will pass on the sum assured to your  family members. Medical insurance (called mediclaim in India and same as health insurance) is to cover the expenses that you incur during hospitalization.

Similarly, the general insurance industry has on offer an insurance cover known as personal accident insurance that covers the risks that arise due to death or disablement caused directly  and solely by accidents.

Personal accident insurance or cover provides compensation, in the form of a fixed sum of money, to you  or your family members if you sustain injuries caused by an accident that results in death, permanent total disablement,  permanent partial disablement or temporary total disablement.

How is accident defined ? Accident means any sudden, unintended and fortuitous external and visible event, which might cause bodily injury or which leads to a physical disability or death.


To elaborate further, generally most of the standard accident policies provides the following three benefits.

Firstly, in the unfortunate event of accidental death, the sum insured is paid out to the nominees. It is to be noted that many policies put a caveat saying the death should happen within some time period of the accident, say within 90 or 180 days.

Secondly, the policy offers

  1. total payout of the sum insured in case of permanent total disability.
  2. a specified percentage of the sum insured in case of permanent partial disability.

Thirdly, in case of temporary total disability, a weekly benefit or compensation is paid for the total period of temporary total disability up-to a maximum of usually 52 weeks. This feature can be very useful to meet your family’s expenses when your income stops.

Along with the above benefits, with an extra premium you can also avail of the following other benefits.

  • hospital cash : payment of money each day subject to some maximum days if accident leads to hospitalization.
  • last rites : payment of money for funeral if accident leads to death.
  • broken bones : payment of money if accident leads to broken bones.
  • education grant : payment of money for education of children who are studying.
  • ambulance and financial assistance is also provided.

Some terms explained

Generally, all insurance companies carry their own definitions of permanent total disability, permanent partial disability and temporary total disability but by and large they all mean the same.

What is permanent total disability ? This disablement prevents one from engaging in his usual occupation or employment anytime in the future. This has to be certified by a doctor. The loss of use of any two limbs, or permanent and complete loss of sight in both eyes or injuries that render the insured incapable of earning an income is covered under permanent total disability.

What do you mean by permanent partial disability ? This disablement prevents one to work with the same efficiency and skill as it was prior to the injury. The permanent loss of any body part, one eye, one limb or one finger or a toe or injuries that render the insured incapable of earning an income and certified by a doctor is covered under permanent partial disability.

The word partial is used here because though the loss is permanent the impact of the loss on the insured’s life in partial.

What is temporary total disability ? The insured in unable to perform any activity on a temporary basis.  He is expected to recuperate and return to work eventually. This is again a doctor certified inability to engage in your usual occupation or employment due to temporary loss in any form eg, a fracture could render you incapable of earning for sometime.

Other key highlights

  • Claims arising out of  terrorism or acts of  terrorism are also covered in some policies. This was not the case earlier but acts like 26/11 in India and the Bhopal gas disaster has changed the way general insurance companies offer these products.
  • Most of the policies are valid throughout the world.
  • No health check-up is required for policy issuance.
  • In case of no claim in a year, the benefits can increase by 5% each year subject to a maximum increase of 25%.
  • These policies are renewable year on year and so you can discontinue the policy if case you do not require it.
  • Family, including spouse and children, can also be covered under the same policy.

What is not covered ?

Death, injury or disablement of an insured person as a result of the following conditions are generally not covered by these policies. Check your policy for the specifics.

  • From intentional self-injury, suicide or attempted suicide
  • Whilst under the influence of intoxicating liquor or drugs
  • Whilst engaging in sporting activities (aviation or ballooning for example)
  • Directly or indirectly caused by venereal disease or insanity
  • Childbirth or pregnancy related
  • War, invasion, act of foreign enemy, hostilities, civil war and many more

Is it expensive ?

For a 30 year old earning Rs 50,000/- per month, almost all the general insurance companies are offering such policies for  a very small amount for a sum insured of Rs 5,00,000/- (as shown below). This is indeed cheap when compared to the hit you will take on your income earning capacity in case you become disabled.


Data from http://www.easyinsuranceindia.com as of Dec 2010

Do I need one ?

Accidents don’t come scheduled. They happen anytime and anywhere. The personal accident policy cover a number of eventualities, including train and road  accidents, plane crashes, murder and even a slip in the bathroom.

In the event of your being bedridden, your income will stop. Who will provide for the financial commitments of your family ? Buying such a policy is the best way to prepare yourself against any eventualities in life. If you think on this for a moment, you will realize that this policy will transfer the risk of temporary or permanent physical disability to an insurance company. So why not take it ?

This becomes more important if you are the only earning member in your house and have many dependents. Your entire family’s future financial goals depend on your income stream and should that stop because of an accident you meet with, they would be unable to meet any of their future dreams.

Why risk it ?!


  1. Very nice information – I did not realise that insuance was avaibale just for accidents as well. I totally agree that this is important to have and it is cheap too. Most of the times we might not be at faulth but acciedents can happen anyways.
    Does this mean that if I take this insurance and die natually,this policy will not be used for claim purposes ?

  2. D. Bahroos says:

    Lovely piece of writing! What is the difference between personal accident policy and critical illness policy? What if an accident causes a permanent critical illness?

    • TheWealthWisher says:

      @D. Bahroos,
      Critical illness is payouts given when one has some critical illness
      – Heart attack
      – Bypass surgery
      – Stroke
      – Cancer
      – Kidney failure
      – Major organ transplant
      – Multiple Sclerosis
      – Aorta graft surgery
      – Primary pulmonary arterial hypertension
      – Paralysis
      However, a personal accident policy will give you payout if you (eg) lose your eyesight as a result of an accident. So this comes into play ONLY in an accident.

      If an accident causes critical illness (accident causes heart attack (critical illness))—>
      (1) If you don’t have critical illness cover, then only your accident cover will come into play and give payouts depending on terms n conditions, if applicable
      (2) If you have critical illness, then I think the payout will happen.

  3. Good article but you have included the quotes of private companies which are expensive. Can you please provide quotes for government companies namely National Insurance and Oriental Insurance as they are more reliable.


  4. Very good article! Wish you had included PSU general insurance companies also. I have a personal accident policy from New India. The maximum amount depends on your annual income (income tax return required). The premium is very less – lower than the accident benefit rider from any term insurance.


    • Radhey Sharma says:

      @Sachin, What is the name of this policy Sachin ? Can you share with the readers so that everyone can benefit…

      • Name of the policy – Personal accident insurance (individual)

        I am paying a yearly premium of Rs. 3884 for an insurance of Rs. 50 lakh, which also includes my wife for Rs. 5 lakh and 2 children for Rs 25,000 each. There are risk groups, some tables A, B, C, D – which frankly I don’t understand. The agent asks for a copy of incometax return.
        The reason I don’t know more detail is because my agent is my cousin (good thing or bad thing? – I think good because I am regular contact with him and he has already arranged the payment for health insurance when it was needed.)
        I think you should discuss this policy with your local agent.


        • Radhey Sharma says:

          @Sachin, I think its Rs 5 lakhs and not 50 lakhs.

          • Six zeros after 5 – That’s 50 lakh, no?

            Don’t take my word for it. As I said, make enquiry in New India or any other PSU isurance office.

          • Radhey Sharma says:

            It can’t be 50 lakhs. That is too much for a health insurance cover and at the premium you have quoted.

  5. @Radhey,

    Still contemplating to buy personal accident policy. Had shortlisted Bajaj alliance but for some reason never took it. Can you share your personal experience on which are good ones.


    • Radhey Sharma says:

      @Rakesh, TATA AIG and StarHealth as well.
      Check them out ?
      I haven’t looked at Bajaj Alliance ever.

      • Jaswinder Singh says:

        @Radhey Sharma, My company provides me health cover from Bajaj Alliance and I must say that I am pleased with my interactions with them as well as the turn-around time (i.e. money in bank) has been satisfactory. BTW, I hope there would be no discrimination wrt the service being provided between a group-cover (the one which the companies buy) and the cover which individuals go for.

      • @Radhey,

        Can you write a post on Critical illness policies? Are they required?


  6. Sir what are the Difference between
    personal accident insurance policy & group personal accident insurance policy
    is Critical illness is covered under group personal accident insurance policy
    ( Particularly : sbi group personal accident insurance policy )
    if possible will u give list of accident deaths
    which is covering and not covering
    my doubts are
    Death due to electric shocks
    Permanent disability by electric shocks
    Heart attack / death in operation theatre / negligence of doctor
    Food position / position mixed by some one to kill
    No medical treatment is available when needed ( i.e no transport / no doctor / no nurse etc )
    Death due to water ( If don’t know swim and they fell in canal/dam/water source
    Is murder consider as accident death

    • Taranatha says:

      Group insurance policy covers for individual employee.. It may be on duty or off duty only. Ask for the policy details. It is usually covered for Corporate groups with discounts on premium.
      So employee met with accident and may death. Then only it covers. Not for any illness or diseases.




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