Talk to any financial planner and you are made to realize that your insurance (including personal accidental insurance) need is much higher than what you are currently covered for and the first question that comes to mind is the exorbitant cost of the high insurance cover you need. On talking in detail you understand that a good part of the insurance need can be fulfilled by personal accidental insurance at a cost which is just 2% to 5% of the premium to be paid for a normal endowment type life insurance policy. To understand it with an illustration.
| Endowment Policy | Accident Policy | |
| Coverage | 5 lakhs | 5 lakhs |
| Tenor | 20 years | 20 years |
| Premium | 25000 p.a | 560 p.a. |
| The personal accidental insurance premium is just 2.25% of the endowment policy premium | ||
While both are not fully comparable, accidental insurance always comes handy when the high-risk cover is required and the cost involved under normal life insurance is exorbitant.
Why accidental insurance?
The probability of a young person dying of natural reasons is much lower as compared to the probability of accidental death. So if we have to buy insurance for a 30-year-old person earning 5 Lakh rupees a year, his insurance need would be close to One Crore Rupees which is certainly going to cost a lot of money, say around 4-5 Lakh rupees a year.
A good strategy would be to buy a combination of Term Insurance and personal accidental Insurance and a little bit of Endowment Insurance. Such a combo should cost around Rs. 50,000 which can be further brought down if the endowment is eliminated altogether till the income levels rise further. By removing endowment at this juncture, the cost will come close to Rs. 16-17,000, which is very much an affordable figure for a person who is earning five lakh a year.
Types of personal accidental Insurance:
| Death | Permanent Disability | Temporary Disability | Hospitalisation | Max coverage | Cost | Coverage | Cost | |
| Death only cover | √ | 10 times annual income | Low | 10 lacs | 500 | |||
| Death & Permanent Disability | √ | √ | 10 times annual income | Twice of 1 | ||||
| Death, Permanent & Temporary disability | √ | √ | √ | 2-5 times annual income | 1.5 times 2 | |||
| Hospitalization | √ | 25% of type 3 cover | 20%-25% of cost of 3 |
How to Buy Personal Accidental Insurance:
- Available with almost all general insurance companies
- Available without any medical tests of any kind
- Amount of insurance is restricted and is linked to the annual income of the person.
- Salaried people have to provide their salary slip and others are expected to provide their income tax returns by the help of which the insurance company can decide the amount of insurance cover to give.
- In most of the companies, there is also a provision of a cumulative bonus for every claim-free year.
Personal accidental insurance is the cheapest and smartest way of filling the insurance gap especially for the young who are aware of the importance of insurance and whose salaries are still not very high.