Personal Accident Insurance

Personal accident (PA) insurance protects an individual against the financial consequences of ACCIDENTAL BODILY INJURY. Cover is triggered when the insured suffers injury caused solely and independently by an accident — conventionally defined as an event that is VIOLENT, ACCIDENTAL, EXTERNAL and VISIBLE in nature.

The essence of a PA policy is that it responds to injury or death arising from an accident, not from natural causes or illness. The accident must be the sole and direct cause of the loss, operating independently of any other cause such as a pre-existing disease.

A typical PA policy bundles several distinct heads of cover into one contract:

• •Accidental death — a lump sum if the insured dies as a result of an accident.
• •Permanent disablement — a lump sum, scaled to the severity of the disablement, for permanent loss of limbs, sight, hearing or other faculties.
• •Medical reimbursement — repayment of medical expenses incurred to treat the accidental injury.
• •Weekly (temporary disablement) benefits — a periodic cash sum replacing income while the insured is temporarily unable to work.

PA is a personal-lines product available to individuals, families and groups (for example, employer-arranged group PA schemes), and can be bought as a standalone policy or added to travel and other covers.

The defining feature of PA insurance is that it is a BENEFIT policy, not a policy of indemnity. Under an indemnity contract (such as motor or household), the insurer restores the insured to the financial position occupied just before the loss — no better, no worse — and the payout is measured by the actual loss suffered.

PA does not work that way. Because a human life, a limb or an eye cannot be valued in money, PA pays a FIXED, PRE-AGREED SUM specified in the policy when the insured event occurs, regardless of any actual monetary loss. The sum is set when the policy is taken out, not calculated after the event.

A practical consequence is that principles which depend on measuring actual loss — notably SUBROGATION and strict CONTRIBUTION — do not apply to the death and disablement (benefit) sections in the way they apply to indemnity policies. An insured can hold several PA policies and, in principle, claim the agreed benefit under each for the same injury.