Why Do You Need a Personal Accident Plan Even if You're Insured?

Why do you need a Personal Accident Plan even if you’re insured?

This is a common question among many Singaporeans. There are many misconceptions about how Personal Accident (PA) insurance plans work – and one dangerous assumption is that they’re “unnecessary” if you already have life and health insurance. Here’s why you should still have a PA policy:

What does a PA plan do?

A PA plan provides pay-outs in the event of an accident. The pay-out can come in the form of a lump-sum pay-out, a weekly benefit, or reimbursement for medical expenses. The nature of the pay-out will be based on the injury.

For example, if you pass away or lose a limb in an accident, you (or your beneficiaries in the event of death) will receive a single lump-sum pay-out. But if you fall down the stairs and need to be treated for a concussion, you will instead receive reimbursement for your medical expenses.

If you are unable to work as a result of an injury (arising from the accident), you can get a weekly income benefit*. The amount and cap on the weekly benefit depends on the level of coverage purchased. With policies such as AXA SmartPA Protect+, lump-sum pay-outs for accidental death or permanent disability can be up to $1 million (up to $1.5 million if the accidental death occurs overseas, or while on public transport).

You can also be reimbursed for up to $10,000, for any medical treatment arising from your accident.

There are also optional add-ons to PA plans. For example, by adding the Add-On Pack to an AXA SmartPA Protect+ plan, you can get a Loan Protector benefit which pays off your outstanding home loan, vehicle loan, etc. in the event of accidental death.

*You must be employed at the time of the accident to qualify for this

Hold on, why do I need this when I already have life / health insurance?

The key difference is that PA plans cover you specifically for accidents. For example, if you develop a condition such as diabetes or stroke, this would fall under the

purview of your health insurance; but if you fracture your foot because your friend backed his car over it, this would be claimable under your PA policy (you can stack the benefits of your health insurance on top of the PA pay-out).

A PA plan is an important complement to your health insurance, for three main reasons:

First, a PA plan can cover the costs that your health insurance won’t

Not every cost will be covered by your health insurance. If you fracture your foot in the above example, it is highly unlikely that you’ll be hospitalised for it. This means there is no hospitalisation expense to claim from your MediShield, and treatment will probably have to be paid out of pocket*. Even if you are hospitalised, the costs of certain tests and scans are not covered. MRI scans, for instance, are often not covered by health insurance (except for cancer patients). But MRI scans and X-rays are two of the most common needs following an accident, such as to check for fractures or internal injuries.

Also, there is some co-payment required for treatment (the lowest possible amount is five per cent, if you have health insurance with a rider). A PA plan can reimburse you for the above costs.

With AXA SmartPA Protect+, you can even get a pay-out for Traditional Chinese Medicine (TCM), if that’s your preferred form of wellness. However, this benefit is only on reimbursement basis, and only if the TCM treatment is medically necessary after an accidental injury.

*Barring the usual subsidies given, and any extra options that you may have bought through a private health insurance policy.

Second, a weekly benefit can be useful when you can’t work

Your health insurance may cover your hospitalisation costs, but remember that you may not be able to work right after an accident. If your job is physical (e.g. warehousing or fitness training), you may not be able to earn an income while you’re recuperating. While the weekly pay outs of a PA plan can’t replace your whole income, it can at least help to keep the basic bills paid until you get better.

For this reason, a PA plan is especially important to freelancers or gig economy workers, such as ride-share drivers*.

*But some ride-share companies may provide group insurance, which includes PA plans.

Third, PA plans cover more than just Total Permanent Disability

PA Plans cover two types of disability:

1. Total Permanent Disability (TPD)
2. Permanent Disablement

TPD, as the name suggests, refers to injury that permanently and completely disables a person, preventing them from performing their daily job functions. Life insurance usually has a pay-out for only Total Permanent Disability (TPD)*. PA plans, however, can cover disabilities that are not so severe, but might still be damaging to your career or life. Permanent disablement, which is the functional disablement of particular body parts (e.g. loss of limbs, loss of sight, etc) that are permanent in nature, is covered under a PA plan but not under life insurance. For example, if you are a workman and lose your fingers in an industrial accident, this can be a serious impediment to your job (e.g. if you are a carpenter). The loss of fingers does not count as a form of TPD, so you would be unable to make any claims for it under your life insurance; but you can do so under a PA plan.

*Some life insurance policies may cover more with optional add-ons

Given the low premiums, there is little reason to skimp on PA plans

Most PA plans are extremely affordable, and seldom amount to more than a few hundred dollars a year. And yet, in exchange for this low premium, you can get up to $1 million or more in coverage.

Disclaimer:

This article is for general information only and does not take into account the specific investment objectives, financial situation or needs of any particular person. The views expressed herein do not necessarily reflect the views of AXA Insurance Pte Ltd and should not be construed as the provision of advice or making of any recommendation. There is no intention to distribute, or offer to sell, or solicit any offer to purchase any product. We recommend that you seek the advice of a qualified financial advisory professional before making any decision to purchase an insurance or investment product. Whilst we have taken reasonable care to ensure that all information provided was obtained from reliable sources and correct at time of publishing, information may become outdated and opinions may change. We are not liable for any loss that may result from the access or use of the information herein provided.