Personal Accident Insurance, Do You Need It?

Personal Accident Insurance, Do You Need It?

No matter how careful you may be, accidents eventually happen. And when they do, you could find yourself unable to work while recovering at home. Personal accident insurance protects you financially in case you get injured. You can claim a lump sum payment or monthly benefit while getting better, without worrying about paying the bills.

What is Personal Accident Insurance?

These policies are designed to mitigate the financial stress associated with a serious injury, especially when mounting medical bills begin to empty your savings.

How Does It Work?

With this, you pay a monthly fee in exchange for financial benefits in case you get injured in an accident.

There are two ways to buy personal accident insurance: standalone or as part of an income protection package.

With standalone personal accident insurance, the insurer will pay you a lump sum immediately upon injury. For example, you may receive $2,000 if you break your leg.

With PAI + income protection, you will receive a monthly payment to replace lost income while recovering from an illness or injury. For example, you may receive a monthly benefit if you were diagnosed with cancer and had to take two months off for chemotherapy.

Two things to note about personal accident insurance: waiting period and benefit period.

  1. Waiting period – indicates how long you have to wait before you can claim your benefit. This can be as short as two weeks or as long as three months.
  2. Benefit period – indicates how long you can claim the benefit. Most insurers pay you monthly benefits for a maximum length of two to five years.

Who Needs Personal Accident Insurance?

What if you were hit by a car while going to work? Or you fell off a ladder and broke your leg? How will your family pay your medical bills if you miss a significant amount of time from work? If you cannot drive, would you need to hire someone to pick up your kids from school?

If you can see yourself in this scenario, then you might want to consider buying personal accident insurance.

What is Covered By Personal Accident Insurance?

If you buy standalone insurance, your policy will typically cover injuries such as:

  • Fractures
  • Burns
  • Dislocations
  • Loss of limb
  • Loss of sight

If you buy personal accident insurance with income protection, you may be covered for illnesses such as:

  • Stroke
  • Heart attack
  • Paralysis
  • Cancer
  • Dementia

When buying, always read the product disclosure statement (PDS), so you know what specific benefits you can expect to receive.

What is NOT Covered By Personal Accident Insurance?

The insurer will not pay you a financial benefit under the following circumstances:

  • If the injury was self-inflicted
  • If the injury was a result of drug or alcohol abuse
  • If the injury happened while you were in jail or in the process of committing a crime

What are the Types of Personal Accident Insurance?

There are four main types of personal accident insurance, each with its own set of injuries covered and payment scheme.

  1. Standalone
  • Covers specific injuries resulting from an accident such as bone fracture, burns, and loss of sight
  • Lump-sum payout
  1. TPD Insurance
  • Covers injuries and illnesses that result in total and permanent disability.
  • Lump-sum payout
  1. Accident-only Income Protection
  • Covers injuries that leave you unable to work temporarily
  • Monthly income replacement payout
  1. Income Protection
  • Covers injuries and illnesses that leave you unable to work temporarily
  • Monthly income replacement payout

What are the Factors That May Affect Premium Payments?

Generally, insurers will calculate your monthly premiums based on the following factors:

  • Your age
  • Your current health status
  • Your income
  • Waiting period
  • Total benefit amount

How Do I Make a Claim for a Personal Accident Injury?

Most insurers require you to submit pertinent documents before approving your claim. These may include:

  • A letter or medical statement from your physician
  • An X-ray or CT scan confirming your injury
  • Proof of identification such as a birth certificate or passport

After submitting the required documents, your insurer should be able to process and approve your claim within a few days.

Click on our comparison tool to see how different insurance policies stack up against each other.

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