All you wanted to know about disability insurance

Medical emergencies or accidents can happen anytime as has been witnessed since the outbreak of Covid-19. While the loss of a loved one is difficult to compensate for, insurance can soften the financial blow for the surviving family. This is especially true if you are the sole bread winner of your family.

There are times when accidents can lead to severe injury resulting in disablement, either mentally or physically, or both. While a term policy covers total permanent disablement, a personal accident policy is better when it comes to covering physical disabilities due to accidents. Health policies too have started providing cover for mental illnesses as well. Here is what you should do.

What’s different

Disabilities due to accidents are covered by both term insurance policy and personal accident policy, based on a doctor’s certification, but there lie differences in the coverage.

When it comes to term policies offered by all life insurers, the coverage for total permanent disability is offered mostly as rider. That is, as a policyholder you will have to purchase the accidental disability rider separately along with your term cover. Also, mostly only permanent total or permanent partial disability (of bodily parts) of the policyholder is covered in such term policies. Here, it is considered to be a permanent total/partial disability if it occurs within 180 days from the date of accident.

On the other hand, standalone personal accident policies offered by almost all health and general insurers, are specifically designed to cover disabilities, both permanent and temporary in nature. In case of immediate death due to accident the entire policy cover amount is paid to the nominee. It is paid even if death is caused within 12 months from the date of accident. A permanent total or partial disablement is an injury that occurs within 12 months from the date of the accident and prevents the insured from attending to his/her normal duties. A temporary disablement is an injury that occurs within seven days from the date of accident. However, this period could vary across insurers.

Compensation

Be it term insurance (rider) or personal accident cover, the policy terminates once the claims are paid. In case of permanent total disablement of the insured, most policies pay the entire the sum insured (SI) to the policyholder. Depending on the option chosen, the claim amount will be paid in lumpsum or over certain period.

But in the case of permanent partial disablement, depending on the extent of the impairment, the claim is paid. That is, the claim amount depends on the extent of the loss including the loss of hearing (both ears and one ear), loss of sight (both eyes and one eye) and fingers and toes. For instance, consider SBI General’s personal accident cover. If within 365 days from the date of the accident, the insured is partially disabled permanently with loss of hearing in both earns then 50 per cent of SI is payable. In case of loss of sight (both eyes) 100 per cent of SI is payable. Other bodily parts include, toes and fingers. In case of any other permanent partial disablement, the compensation will be decided based on doctor’s assessment.

On the other hand, in the case of disablement being of temporary nature as per the doctor’s certification, the insurers usually pay a specific sum each week up to certain weeks within the policy period. For instance, SBI General’s policy, pays 1 per cent of the SI or ₹10,000 per week whichever is lower with one week (compensation) as deductible. The benefit is payable for 104 weeks (in-built). In case of Max Bupa’s Health Assurance Plan, if the policyholder suffers temporary total disability (TTD) due to accident within 365 days from the date of accident, then the policy will pay 1 per cent of the SI per week up to 100 weeks. But note that, Max Bupa offers this as an optional cover. Similarly, in case of Saral Bima Suraksha, a standard personal accident cover introduced by IRDAI, TTD is offered as an optional cover. That is, the policyholder should pay additional premium to avail this cover.

Other optional covers include hospitalisation expenses due to accident, education grant (where SI is paid for the education of children up to a certain limit) and cumulative bonus. Funeral expenses are also offered by most insurers.

The sum insured for personal accident including the standard cover ranges from ₹1 lakh to ₹1 crore.

Mental illness

When it comes to mental illnesses, they get covered in your health policy while the same policy takes care of your hospitalisation expenses in case of any disability due to accidents From October 2020, the insurance regulator, IRDAI, has mandated all insurers to offer coverage to individuals with disability and people affected with HIV/AIDS and mental illnesses which includes depression, anxiety disorders, schizophrenia and bipolar disorders.

Therefore, those with a family history of mental illnesses and where it is likely for the insured person to acquire such an ailment can get coverage from his / her health insurer. But one may have to undergo 2-4 years of waiting period. Similarly, anyone suffering from a post-accident trauma or any other trauma (resulting in mental ailments) too will get coverage.

If the individual already suffers from a mental disability, he or she may be subject to medical underwriting and then be issued a health policyS Prakash, Managing Director, Star Health and Allied Insurance, says “In select cases, doctors in the underwriting department assess the level of mental illness or physical disability and suggest them a suitable health cover based on their affordability”

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