Personal accident insurance


What is personal accident insurance?

Personal accident insurance is being offered regularly when you are buying other insurance – particularly motor insurance. The reason is that insurance companies and brokers are keeping premiums as low as possible to attract your business, and then they try to sell you extras. The usual add-ons are legal cover or legal expenses insurance to give it the full title, and personal accident insurance.

Most insurance is designed to make good a loss, called a policy of indemnity. Personal accident cover is different as it covers particular injuries caused by particular events. It might make a payment if you loss a limb, or your sight, as a result of an accident, but it will not pay out simply because you are injured. The injuries covered by the policy are usually specified in the policy. Some personal accident policies make a payment if you are detained in hospital for a certain number of days.

To check the value to you of personal accident insurance you have to look at what is covered, and then weigh up the chances of those injuries and events happening.

If you are worried about long term earnings loss then a personal accident policy will not help you, and you ought to be looking at permanent health insurance or income protection insurance.

The cost of personal accident cover looks low, but once you have read the policy document you might find you are not being offered much cover.

We have taken a few words from the website of the Financial Ombudsman to help us explain these personal accident policies are not as simple as they might seem.

“Most personal accident policies pay out only if the policyholder suffers ‘accidental bodily injury or death solely and directly as a result of an external, violent and visible cause’, or words to that effect. There are usually defined benefits for certain injuries depending on the level of cover purchased, for example, £10,000 for loss of use of a limb, £8,000 for loss of an eye, £80,000 for permanent total disablement, etc.

Many cases are relatively straightforward: if you are involved in an accident which results in permanent ‘bodily injury’ as defined in the policy, then you receive the appropriate sum for that type of injury.

Sometimes there are issues about whether the injury was the sole and direct result of the accident, particularly in the case of orthopaedic injuries where pre-existing degenerative changes like arthritis) may have contributed towards the disability. However, these cases can usually be resolved by reference to appropriate medical evidence. If, for example, the evidence establishes that the accident caused only 10% of the injury — the other 90% being due to degenerative change — then we would usually ask the insurer to pay 10% of the benefit. This is on the basis of good industry practice: many insurers voluntarily make a proportionate contribution if the accident is shown to have accelerated pre-existing degenerative changes.”

If you would like to read more from the Financial Ombudsman’s site please click here.

I am not saying that personal accident insurance is no good, but I am saying you should carefully weigh up why you need this insurance, and ask is its price fair. If you are offered such insurance at a time when you are arranging other insurance we suggest you do not buy, as you do not have enough time to weigh up the pros and cons. You are completing another transaction, you have your credit card in your hand, and you are relieved to be coming to the end of a process. That looks like a good time to sell you a little extra or two, which you may or may not need.