The IRDAI has decided to mandate all general and health insurers to offer a standard personal accident insurance product.
Temporary total disablement is covered under its optional cover – that is, add-on that you can buy after paying an extra premium. Representational image/ source: Pixabay
There is a wide variety of personal accident insurance products in the market at present. Each product has unique features, making it a challenge for the insured to choose the right product. To overcome this challenge, a standard product with common coverage and policy wordings across the industry is set to be introduced in 2021.
The IRDAI has decided to mandate all general and health insurers to offer a standard personal accident insurance product. This will be a standard personal accident product with common coverage and policy wordings across the industry, which every insurance customer should know, Neeraj Prakash, Managing Director, Shriram General Insurance, told FE Online.
According to Prakash, every general and standalone health insurer, who has been issued a certificate of registration to transact general and/or health insurance business, shall mandatorily offer this product. The standard product should have basic mandatory covers offering protection against death, permanent disablement, or partial disablement due to accidents.
Common Features of Standard Personal Accident insurance product
The standard cover would offer protection against death, permanent disablement, or partial disablement due to accidents. It would be offered with a policy term of one year. The standard product would also cover expenses towards hospitalization.
The standard personal accident cover should have basic mandatory covers, which should be uniform across the market. The standard product will need to be offered with a policy term of one year and also cover expenses towards hospitalization, said Prakash.
According to the Shriram General Insurance MD, the insurer may determine the price keeping in view the covers proposed to be offered subject to complying with the norms. Minimum sum insured shall be Rs 2.5 lakh and a maximum sum insured shall be Rs 1 crore. Beyond that, insurers can offer on their own and can use the same name for the product if all terms and conditions remain the same.
Standard personal accident policy benefits
Benefit equal to 100 per cent of sum insured has also been proposed in the case of ‘permanent total disablement’ subject to conditions.
Following an admissible claim of the insured person under the policy towards death or permanent total disability of the insured person, “a one-time educational grant of 10 per cent of the base sum insured, each, shall be payable, for a maximum of two dependent children of the insured” subject to certain conditions.
Optional add-on benefits
Temporary total disablement is covered under its optional cover – that is, add-on that you can buy after paying an extra premium. “Under this cover, you will be entitled to compensation at the rate of one per cent of the sum insured per week till you return to work or up to 100 weeks, whichever is earlier. Likewise, hospitalization expenses, too, will be covered to the extent of actual expenses incurred by you, if you buy an optional add-on cover,” said Prakash. However, these will be capped at 10 per cent of the sum-insured, he added.
The third optional cover on offer is termed education grant.
In the case of death or permanent disablement of the policyholder, the insurer will pay a one-time educational grant of 10 per cent of the base sum insured for up to two dependent children, not older than 25 years. This payment will be made only if the child is pursuing a course as a full-time student in an educational institution.
On base covers, benefit equal to 100 per cent of sum insured shall be payable on death of the insured person, due to an injury sustained in an accident during the policy period, provided that the insured person’s death occurs within 12 months from the date of the accident.
Increase in Sum Insured
Sum insured should be increased by five per cent in respect of each claim free policy year, provided that the policy is renewed without a break subject to maximum of 50 per cent of the sum insured. If a claim is made in any particular year, the cumulative bonus accrued may be reduced at the same rate at which it has accrued.
Why is Personal Accident cover important?
“A personal accident policy is a must-have in your portfolio. Youngsters tend to put off life and health insurance purchases if they have no dependents or believe they are in perfect health, but the risk of accidents cannot be wished away. While these limitations are part of the standard cover as well, the fact that it has been devised by the regulator will offer comfort to policyholders,” said Prakash.
“The probability of policyholders feeling short-changed by the insurer would be lower as they would know that the clauses are uniform across companies,” it added.