Personal accident cover pays a fixed amount when an accident causes death or permanent disability, according to a scale set in the policy. It does not pay for illness, it does not pay hospital bills, and it does not pay when the cause of death is not an accident. That narrow scope is what makes it confusing: people who hold it through a bank card, a loan, an employer group or a motor policy often believe they have life cover, and people who have genuine term cover sometimes buy a second personal accident policy they do not need.

Method and data basis

Built from how personal accident cover works under standard Indian wordings as ordinarily issued: a compensation scale on accidental injury, a capital sum insured, and defined exclusions. For the compulsory owner-driver cover inside motor policies, the basis is IRDAI's circular of September 2018, which set a minimum capital sum insured of Rs 15 lakh at Rs 750 a year for annual policies and allowed a stand-alone version from January 1, 2019 covering all vehicles the owner-driver holds. Your policy wording governs, including any schedule of disabilities, survival period or weekly benefit.

What personal accident cover pays

  • Death by accident: usually the full capital sum insured.
  • Permanent total disability from injuries other than the named partial losses, again typically the full sum.
  • Permanent partial disability at a percentage: the standard Indian scale pays 100 percent for loss of two limbs, sight of both eyes, or one limb and sight of one eye, and 50 percent for loss of one limb or sight of one eye.
  • Temporary total disablement: many wordings add a weekly payment while you cannot work, capped at a number of weeks.
  • Immediate liquidity: unlike a term claim, which is investigated for cause of death, an accidental death claim is usually settled faster, which is why families use it for dues.

What it does not pay

  • Illness and natural death. A heart attack, cancer or any non-accidental cause is outside the cover.
  • Hospital bills. Treatment costs are health insurance, not personal accident cover.
  • The standard exclusions: intentional self-injury, suicide attempts, accidents under the influence of intoxicating liquor or drugs, and injuries from hazardous pursuits where the wording says so.
  • Anything not in the schedule. The list of disabilities that count is defined in the policy, and a permanent injury that is not on it may not pay.

How it differs from term cover

Term insurance pays a sum you choose when death occurs from any cause, subject to the policy terms, and it is the instrument for replacing income. Personal accident cover pays an amount fixed by the accident scale, for accidents only, and it is the instrument for the sudden costs and income gap that follow an injury. One covers the probability of dying, the other covers the consequences of being hurt. Neither substitutes for health insurance, which pays for treatment.

Where you probably already hold it

Check before you buy. Credit cards often carry accidental death cover tied to a fare booked on the card. Bank loans are frequently bundled with personal accident cover for the borrower, which is one of the practices IRDAI's current consultation proposes to curb by ending the linking of loan approval to insurance purchase. Employers commonly run group accident cover that ends when the job does. Motor policies carry the compulsory owner-driver cover, with a statutory minimum of Rs 15 lakh. Add these up once, and you may find you already hold more accident cover than you realise, and that none of it survives the event that created the need.

Action

List every policy you hold and mark which ones pay on accident only. If the total accident cover exceeds what your family would need for two years of expenses plus dues, do not renew the extra for the sake of it. If your only cover is a card or an employer group policy, treat it as temporary and buy an individual term policy for the real exposure. If you ride or drive, confirm the compulsory owner-driver cover in force, its capital sum insured, and whether you opted for a stand-alone version, since a company-owned vehicle does not qualify for it at all. Finally, read the disability schedule once, before you claim: knowing which injuries count is the difference between a plan and a hope.

Watch item: the treatment of accident cover sold with loans in the final consultation rules, since bundling is where the largest amount of unnecessary duplication is bought.