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Accident Insurance

Accident insurance is designed to pay out a specified lump sum if a serious injury is sustained by the policyholder as the result of an accidental event. Essentially these policies are taken out to insure against the risks we encounter in our hectic daily modern lives. Whether it be crossing the road or shopping in a supermarket, accident insurance can protect you.

Accident insurance policies are typical examples of non-indemnity insurance contracts, as they do not indemnify the policyholder against the loss of a bodily part. What this means is that, for example, if you are unfortunate enough to lose an eye, no-one can replace it, including your accident insurance provider. So you cannot be indemnified against the accidental loss of a body part. Instead accident insurance pays out a cash sum to 'compensate' the loss.

Typically accident insurance policies cover permanent total disability, loss of sight, loss of use of limbs, loss of hearing, loss of use of a shoulder, hip, knee, ankle, etc. Accident insurance policies can also provide payments for hospitalisation or even accidental death (in which case a lump sum would be paid to a designated person or persons).

Pay outs on accident insurance are wholly dependant on the level of cover selected and the nature of the disability incurred. Major disabilities, such as permanent total disability or loss of two eyes, two limbs or two ears will result in full payment of the insured sum. However, perceived lesser injuries will pay out less. For example, a typical accident insurance policy will pay half of the full sum for the loss of just one eye or limb, while the loss of use of a single joint will typical result in a pay out of about 10% of the full sum. The loss of digits [fingers] is commonly valued at less than 10%. Payments for accidental death can vary greatly depending on the accident insurance provider. Some accident insurance policies will pay out as little as 10%, while more generous products will offer up to 50% of the total insured sum.

There are standard exclusions to accident insurance policies. Injuries sustained from an accident directly or indirectly related to an attempted suicide are not covered. Accidental injuries incurred by those under the influence of alcohol or drugs (without acceptable medical reason) are also excluded on accident insurance policies. Furthermore, some policies will not pay for the development of disabilities if they have happened a significant period after the stated causal accident. The cut-off period for this exclusion is typically 12 months. Many accident insurance policies will not cover perceived dangerous leisure activities, such as mountain climbing, skydiving or other hazardous pursuit.

Accident insurance policies can be taken out on an individual basis or within a group setting. To cater for common customers' needs, most accident insurance providers offer joint partner cover, joint two individuals cover and parent and child cover. However, many can also offer flexibility and therefore other combinations of personal cover.

As with many life insurance policies, accident insurance terms typically end once a named insured reaches 75. Similarly, policies that name one or more children will end when the first reaches 18 and policies will automatically terminate if the full insured amount is paid out. In this case, the policyholder can take out another policy to cover the remaining children under 18, possibly at a lower premium as there are less members covered.