All You Need to Know About Personal Accident Insurance - Coverage, Exclusions and Tax Benefits

Medical emergencies can hit you anytime and take you off guard if you haven’t planned for them. It may end up denting your finances. Medical expenses for sudden injuries and accidents can lead to exorbitant expenses, which is why we must prioritize the well-being of our family and ourselves. This brings us to a very important element of financial planning which is often ignored by a majority of people—Personal Accident Insurance. 

What is Personal Accident Insurance?

Accidents are unexpected events, and in such scenarios, arranging funds immediately for medical assistance and treatment can be a daunting task. This is where personal accident insurance is important. This insurance policy offers a cover against death or disability (permanent total or permanent partial or temporary total). It also offers education benefits, funeral expenses, and travel expenses, amongst other benefits. In case of either death of the insured or permanent disability, the sum insured is paid by the insurance company, following which the policy is terminated.

What does Personal Accident Insurance cover?

Insurance products, such as life insurance or health insurance, cover specific incidents and offer coverage to minimize the financial repercussions of the accident. However, Personal Accident Insurance offers additional coverage for potential incidents. For instance, this insurance product can offer coverage for disability caused due to an accident while at work, renovation expenses for your vehicle or home that has been damaged due to the accident, and so on. This insurance cover helps us by creating an atmosphere free of financial worries in such unforeseen events.

Let’s have a look at the standard coverage offered by Personal Accident Insurance:

Accidental Death 

An accident not just causes sorrow to the family members of the insured individual but also affects them financially. In case the insured individual dies or suffers any fatal injuries on account of the accident, the beneficiary or nominee will receive 100% of the sum assured in the document as compensation.

Permanent Total Disability 

Permanent disability means the individual cannot work due to permanent loss of vision or functioning of both limbs/feet. If the insured individual suffers permanent disability on account of injuries in an accident, then the individual receives the pre-determined amount insured post considering the severity of the disability.

Permanent Partial Disability 

If due to an accident, the insured individual suffers an injury that impairs his efficiency because of partial loss of functioning of the limbs, and the chance of treatment or recovery is zero, it is referred to as permanent partial disability. The insurance policy covers scenarios such as nerve damage, vision loss in one eye, and so on. In such a situation, the coverage can vary between 50% to 100%.

Temporary Total Disability

If due to an accident, the insured suffers an accidental injury that exists temporarily, for instance, a fracture or is bedridden for a while; it is known as temporary total disability. In such a situation, the insured will get back to work within a few days or months and will be able to function efficiently. The insured will get a weekly allowance (up to 100 weeks) of 1% of the amount assured to compensate for the loss of earnings.

Additional coverage offered by Insurance companies:

In addition to the standard coverage, insurance companies also offer extra coverage. Let’s have a look at some of the coverages offered.

5. Child Education Coverage

If due o an accident, the insured individual dies or has an injury that causes permanent total disability, the insurer offers the insured’s children education coverage. This covers the education of two children below 25 years of age. While purchasing the policy, this add-on will have to be selected by the individual.

6. Terrorism

Some insurance companies offer cover to the insured individual for injuries caused due to acts of terrorism. Note that not all insurance companies offer this cover. However, the terms of the insurance policy will have to be checked before the purchase. 

7. Extra Benefits

Insurance policies like the Activ Secure Personal Accident Health Insurance offered by Aditya Birla Health Insurance offer many add-ons at an extra premium, like funeral expenses, orphan benefits, renovation expenses, ambulance expenses, fracture cover, and so on. Be sure to check out the insurance policies offering these benefits before purchasing them.

What are the exclusions in Personal Accident Insurance?

There are a few common exclusions that every Personal Accident Insurance policyholder should be aware of. Let’s have a look at them.

1. Intentional Injuries
2. Injuries from Wars (Civil or Foreign)
3. Injuries caused by consuming Drugs or Alcohol
4. Accidents caused due to riding a two-wheeler with an engine capacity exceeding150cc
5. Death, disability, or accident caused due to the policyholder suffering from diseases like HIV/AIDS/STDs
6. Injuries are caused by involving oneself in violent public disturbances such as riots, strikes, protests, etc.
7. Injuries caused when on duty with either the military, paramilitary, or police force
8. Injuries are caused by participating in unsafe sports such as rafting, mountaineering, para-gliding, bungee jumping, etc.
9. Accident due to any pre-existing illness
10. Any claim arising from issues like pregnancy/childbirth

Are there Tax Benefits on Personal Accident Insurance?

We always assume that every insurance offers us tax benefits. However, we must be aware that tax benefits are available to an insured person who purchases either health insurance or life insurance. Let’s have a look at the possible personal accident insurance tax benefit scenarios:

1. Section 80C and 80D of the Income Tax Act

Personal accident insurance policies aren’t eligible for any tax benefits  u/s 80C and 80D. A personal accidental policy purchased under the superannuation program for employees isn’t eligible for tax deductions. Furthermore, specific policies where a lump sum amount is received on the claim by the insured, inset applicable for tax deductions. For example, accidental accident insurance, critical care insurance, trauma insurance, etc

2. Combined Insurance Policy

Personal accidental covers aren’t always excluded from tax deductions. In combined policies, understanding tax deductions is quite a task. For instance, an insurance policy that offers personal accident as well as life insurance coverage. In such a policy, the policyholder will need to understand from the insurer the premium portion that is eligible for tax benefits. 

3. Special Condition

Personal accident insurance income tax benefit is possibly applicable under a specific condition:

The insurance premium can be claimed insurance against income loss, but the guidelines for claiming tax benefits on insurance premiums are quite detailed. To enjoy personal accident insurance income tax benefits, we must be able to show that the premium has been paid to protect our taxable income. This could benefit the small businessmen/traders paying premiums to safeguard their income.

Personal accident insurance is coverage that offers financial protection to the insured in case of any unexpected accidents. We are aware that accidents can happen anywhere, anytime and to anyone and the personal as well as financial impact is devastating. Though personal accident insurance might not offer tax benefits, it acts like a safety net that can take care of medical expenses, and many other costs thereby reducing the financial burden on the individual and their families. It's never too early to consider purchasing personal accident insurance, so contact a reputable insurance provider or visit the ABHI website to learn more about the coverage options available.