Page 312 - DMGT303_BANKING_AND_INSURANCE

Unit 14: Marine and Motor Insurance

Limitation to Accident Riders Notes

Like other life insurance riders, the maximum accident cover under riders is 30 per cent of the
sum assured. Since most life covers end at around age 65, the coverage from accident riders end
with the base policy.
Another important point to remember is that once the claim is made, lump sum amount will be
paid in case of death or staggered payments made in case of permanent total disability say 10 per
cent of the rider cover annually over 10 years. In case one survive the accident, the coverage
effectively ends from the time one makes the claim.

PAIP vs. Accident Riders

If we compare the two options, PAIP has an edge:

1. One gets a weekly payout in case of temporary total disability; a facility that riders don't
give.
2. PAIP's coverage in terms of age limit is more and the coverage doesn't end after a claim is
made, as is the case with accident riders.
3. A customer, who does not need a long-term commitment required in a life policy, can take
a stand-alone (separate) personal accident cover.
Amount of Accident Insurance Cover

After fixing an option to buy accident insurance, the calculations as to the amount of cover need
to be done on the same principle as computation of life insurance.

Example:
Table 14.1: Sample Calculation of Insurance
Cover Needs
1. Take-home salary 25,000
2. Reduction in expenses 2,500
3. Spouses’ take home salary 12,000
4. Income from investments 6,000
5. Current disability income Needs [1 – 2 + 3 + 4)] 4,500
6. Inflation adjusted disability income needs 31,680
7. Disability income needed in future (5 + 6)/2 18,090

An Illustration ICICI Lombard: Personal Accident Policy Cover
Terrorism and acts of terrorism: In case of the death of the insured arising out of terrorism
or acts of terrorism within the policy period, the nominee (mentioned in the policy) is
compensated with the sum Insured. The company shall also pay compensation against
permanent and total loss of limbs, sight etc. (of the insured) arising out of terrorism or acts
of terrorism.
Accidental death: In case of death of the insured due to an accident within the policy
period, the nominee (mentioned in the policy) is compensated with the sum insured.
Permanent total disablement (PTD): Personal Accident pays compensation against the
permanent and total loss of limbs, sight etc. due to an accident.

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