What is Personal Accident Insurance?

Personal accident insurance pays out an income if you're unable to work because of illness or injury. Personal accident insurance aims to put you back to the position you were in before you were unable to work. It pays a regular tax- free monthly income.

It does not allow you to make a profit out of your misfortune. So the maximum amount of income you can replace through insurance is broadly the after-tax earnings you have lost less an adjustment for state benefits you can claim. This is usually translated into a maximum of 50% to 65% of your before-tax earnings.

As with all insurance, the trick to buying the right type is to consider exactly what it is that you need it to do for you. You need to have a very close look at the small print of any policy to make sure it will pay out when you want it to.

Personal Accident cover is often included in motor, travel, sports, home and business covers. It is often included or an option on Private Medical Insurances.

The smallish premiums mean it tends to be expensive to sell and administer, so few insurers now offer covers.

The need for personal accident insurance

Accidents can happen to any one at any time. You are a very lucky person if you manage to go through life without having an accident. Road crash, house fire, assault, workplace accident or a simple trip. These are common. The headline stories of fires, murder and terrorism are not common. It is the everyday workplace, home and road accidents that claim most victims.

The main thing with accidents is that they are random and can happen to anyone anytime anywhere. Most accidents are minor, but others can be more serious. In the blink of an eye, your life could be changed for ever. Accidents happen every day, everywhere.

Just look at these latest statistics from the Royal Society for the Prevention of Accidents (RoSPA):

Accidents on the roads

• During 2004 there were 280,840 casualties on British Roads
  



• That includes 3221 killed and 31,330 seriously injured
  

Accidents at home

• Surprisingly, your home is one of the most dangerous places you can be.
  



• Home injuries send an incredible 2.8 million people to hospital Accident and Emergency units, with an unknown number going to GPs for less serious accidents.
  



• Every day, ten people die and 8000 people seek medical treatment as a result of home and garden accidents in the UK.
  



• Most common accidents are falls from height, choking, poisoning, burns and scalds.
  

Accidents at work

• You are also at risk at work.
  



• In 2005 around 2 million people were hurt at work and required treatment at a hospital casualty department. In 2005 over 200 people died, and over 350,000 were seriously injured. Many had to take weeks off work.
  

Accidents involving children

• The saddest figure is the annual toll of child deaths from accident, including 260 road casualties
  



• Every year, 3 million children suffered injuries which require attendance at the A&E department of a hospital. A million are injured in and around schools, recreational areas, and sports facilities and so on -and 2 million in and around the home.
  
  If a serious accident befalls you, then you may be unable to work for the rest of your life. You may need money for income or adapting your home.
  



• You have a one in seven chance of being off work for 6 months due to illness or accident, during your working life.
  



• Thankfully, medical advances and better remedial care mean that more people can return to work and normal life.
  



• You may expect the state to support you. You may get a small amount of benefit, but may have to go through unpleasant interviews, medical tests and a review of your finances. Sadly, with many fraudulent claimants, the state treats everyone claiming benefit with great suspicion, guilty until proven innocent.
  



• If you are a specialist tradesperson, or professional, a serious injury may mean that you can work, but not in the profession or type of occupation you were used to. Politicians may dislike the blunt truth, but in the modern world, the state expects you to take any form of work on offer.

• They may even force you to go on training programmes, before they decide whether or not to give you a handout.
  



• By law, an employer must pay most employees statutory sick pay for up to 28 weeks. This will almost certainly be a lot less than your full earnings. Few pay for longer. If it is obvious you can never return to work, they may stop paying and terminate your employment. Not all employers pay willingly.

Personal accident plans: Types of policy

The insurance industry can confuse customers and itself with the titles it gives to types of policy within the wider definition of personal accident Insurance.

There is a thin dividing line between personal accident and income protection policies.
Simple personal accident policies only pay a cash sum following an accident where you are injured
Simple income protection policies pay when you are off work following an accident
Where they merge is when an income protection policy also includes illness, and a personal accident policy includes sickness and/ or pays monthly benefits rather than a cash sum.
We regard policies which cover an accident and sickness/ illness by paying a cash sum as Personal Accident
We regard policies which cover accident and illness by paying a monthly benefit as Income Protection.

But it is not always clear-cut so we suggest you read both sections.

Policies to protect mortgages, loans or credit card debts are frequently called Accident Sickness Unemployment (ASU) policies; these are not Personal Accident plans, but Income Protection ones.

Insurers themselves often confuse you by using vague product names like " Protection " which can include income protection, critical illness, life, personal accident and other products. - or a flashy name which gives no indication of what it covers.

There are three main ways to partially or wholly protect you against the costs of long term care.
On some products, you only get money if you qualify as needing care.
On some products, you get money anyway, but there is some help in arranging care if needed.
On investment and Equity Release products, you choose whether or not to use the proceeds on care.

The products do not always fit neatly into one or other category. Increasingly, we see products, which offer a range of options now, and in the future.

Personal accident plans fall into the following main categories. Select one of the product types for an explanation of how these plans work and what they offer.
Individual
Children
Group personal accident plans
Sports and Hobbies
Team
Professional
Self employed
Over 50
Travel accident
High Nett Worth

As the latter two categories of plan are financial/ investment products, rather than health insurances, we have only profiled a few insurers and specialists who offer these products, often only via financial advisors. We have not profiled the scores of lifetime mortgage and home reversion plans that are offered by banks, building societies, retailers and a myriad of investment based businesses.