Personal accident insurance is an optional cover in many business insurance policies. However, it’s a type of insurance that many people don’t consider buying until it’s too late.
So, what does it cover and why do you need this important type of insurance?
Personal accident insurance covers you if you are unable to work because you’ve been injured.
The reason you need to have personal accident insurance if you are self-employed is because, unlike employees, self-employed people don’t get sick pay so if they are unable to work, they’re unable to earn.
If an injury means you’re unable to work, your personal accident insurance will cover the earnings that you have lost. This means that you’ll still be able to cover your monthly outgoings such as your mortgage or rent, your utility bills, etc., and still be able to put food on the table.
How you claim depends on how long you will be unable to work.
The weekly benefit
If you will be off work temporarily, the policy pays a weekly benefit. If you are off work due to a broken arm, for instance, the policy will pay you a weekly amount until your arm has recovered and you’re able to work again.
There is no set number of weeks for any particular injury type. As with the sick pay that employees get, the policy simply pays the weekly benefit until you have recovered.
Knowing that you’ll be able to pay your bills even though you cannot work means that you can concentrate on your recovery without having to worry about financial matters.
The amount of the weekly benefit that would be payable will be defined in the personal accident insurance policy schedule.
The policy excess
Like other types of insurance, personal accident insurance companies keep their premiums low by using a policy excess which means that the insurance doesn’t keep getting triggered by small claims that the policyholder could afford to pay themselves. Although the amounts of these claims are small, the administration cost involved in handling them is disproportionately high.
The difference with personal accident insurance is that rather than the policyholder having to contribute a financial amount towards each claim, the excess in a personal accident insurance policy excess is time-based. This means that it will not start paying the weekly benefit until a specified amount of time has elapsed. Often this time period will be between two and four weeks.
There are some injuries which mean that the person who has been injured will never be able to return to work. Where this is the case, personal accident insurance pays a lump sum rather than a weekly benefit.
Usually, the personal accident policy will also pay a lump sum for certain specific injuries. Examples of these are the loss of a limb or the loss of one or both eyes.
Personal accident insurance also pays a lump sum if the policyholder dies as a result of their injury.
The amount of the lump sum that would be payable will be defined in the personal accident insurance policy schedule.
Personal accident insurance is often called personal accident and sickness insurance because as well as covering lost earnings when the policyholder is unable to work due to an injury, it normally also covers loss of earnings via the weekly benefit when people are unable to work because they are ill.
As with injuries, the excess period applies so you can’t claim if an illness only results you being unable to work for a short period of time. In addition, if your illness means you’ll never be able to return to work, a lump sum will be payable rather than a weekly benefit.
You will usually need to produce a note from your doctor to show that you’re ill.