Friday, January 9, 2009

Why Personal Accident Plan???

Most people took up a Personal Accident plan via telemarketers, Credit Card complement or through their company's corporate insurer. An adviser who do not do proper fact-finding may miss out recommending a PA plan. It is understandable that few advisers like to recommend a PA plan largely due to the low premium, low commission and the high chance of claim.

Many people do not have such a low cost policy because they did not hear about it or has misunderstood its coverage. It will be quite unfortunate if an accident strike and they are not able to claim things that are unique to a PA plan. Today, I like to share why its important to have a Personal Accident Plan.

1) Beefing up Death Coverage at low cost
* 6% of Singaporeans die of Accident in 2007. It is not a big number compared to Cancer and Heart Diseases but I believe the chance that a young man dies via accident is higher compared to sickness.
* And it is usually that young man have a higher dependency needs when they are likely to be under-insured.

2) Covering Accidental Permanent Disablement
*A person’s life have a certain value attached which are determined by his dependency needs. Likewise, a person’s hand, leg or eyes should have a value attached as well.
* If a person loses a leg, eye or finger permanently, he is likely not able to claim for any of his policy.
* The chance that a healthy person loses a finger, hand or eye is largely via accident.
* Example. Full Sum Assured $100,000. Loss of one arm = 50%, Loss of one finger = 8% x $100k.

3) Accident Medical Reimbursement
* A person may not be admitted to hospital upon meeting an accident because an accident may not necessary means a major road accident or work place accident, etc. It can be a simple sprain during house moving or a bad cut during cooking, etc.
* Such incident may end the person up in hospital A&E or just the neighbourhood clinic or even the Traditional Chinese Medicine Clinics. Such expenses may come up to as much as several hundred dollars.
* Post Accident visits to Physiotherapist, Chiropractor, Osteopathic Practitioner, Bonesetter or even Acupuncturist might even cost you few thousand dollars if they are not serious enough for one to be hospitalised.

4) The other "Good to have" covers
The 3 items above the are core coverage, but there are many sub-coverage which many accident plans include. The rest are good to have but usually not critical.
a) Daily Hospital Benefits or Weekly Disablement Benefits - Allows you to claim $XXX amount per day in hospital or per week of disablement. Good coverage for those self employed people.
b) Mobility Aid Reimbursement - Allows you to buy mobility aid such as Wheelchair, clutches, etc
c) Ambulance services - Allows you to claim against Ambulance expenses as a result of an accident.

Well. In my next posting, I can share the tips in selecting a good PA plan.


Anonymous said...

Hi Adrian,

You mentioned “Beefing up Death Coverage at low cost” for a person with dependents. With Term insurance costing so low, why buy an accidental death benefit? What happens if the death is not due to accident? A term insurance covers death due to any causes. Moreover, a yearly renewable term insurance is even lower in premium.

You mentioned about “Covering Accidental Permanent Disablement. A person’s life have a certain value attached which are determined by his dependency needs” This “value” you mentioned about is the lost of income. If such disablement causes lost of income, the *Disability Income (DI) insurance should be the plan to meet this need. Moreover, the DI plan covers non-accidental causes as well. The accidental partial disablement benefits that pays a percentage of the sum assured cannot hedge the lost of income of such a person.

You mentioned “Accident Medical Reimbursement..” With the as-charge shield plan available, medical reimbursement is no more an issue. While it is true that the shield plan requires a person to be admitted to hospital, it is not difficult to request the doctor for the individual to be admitted to just one day stay. This can be easily done for private hospital. This will permit the life assured to claim for medical bill during the stay and post hospitalization medical bill for 90 days. Thus, it is not necessary to have an Accident Medical Reimbursement.

*High risk occupational group such as Police, Civil Defense personnel, Military, etc are not permitted to be insured with Disability Income for obvious reason. For them the chances of meeting an accident is very high. If they are downgraded, they will lose their job. However, they have the Aviva's SAF Group insurance and HomeTeam's NTUC Group insurance that covers death, accidental partial disablement, and the usual TPD. These group plans are very cheap. Of course, advisers do not recommend these group plans because it pays no commission.

There is one particular group of insurance agents that will always try to recommend a standalone PA plan. They have been doing this for decades already. I was told from an ex-agent that it is because such a PA plan gives them perpetual commission and not because it is a great product.

Khiat Han Hwee Adrian said...

Thanks Anonymous 8:53 for bringing up so many points. They are enlightening indeed.

You are right to say that Term is good for coverage at low cost. It may not be entirely true for someone who is in the 40s or 50s or if the person is not insurable for some reason.
I also like to highlight that its to beef up the cover, not using PA term entirely to cover natural death.

The Value that I want to highlight here is the "Value" of our hands, legs, eyes, etc. If I lost an Eye due to accident and I don't get anything, I think it can be quite sad because I believe there is really a value to my eyes.

Accidental Medical Reimburesment Benefit is to help cover medical expenses outside hospitalisation. I'm currently under specialist and Psysiotheraphy treatment in Changi Hospital after my back sprain last December. I'm claiming against my PA plan but not the Shield plan.

Of course, for those who are rich or those whose medical expenses are covered by company, this shall not be an issue.

The premium is very low. For $100k cover, we normally don't need to spend more than $10/mth. I'll recommend my clients to take up a simple and basic PA cover.

Anonymous said...

Why PAs are cheap is because the chances or the probability of death is very low. PAs should not be used as substitutes for term plans. It is something that is extra at best.