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Small premium, big insurance
S Bridget Leena in Mumbai
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September 22, 2005 11:35 IST

Mr Mehra was enroute to a brief vacation with his family in his car, when an accident occurred. Fortunately, his family escaped with just minor injuries, but Mehra was shocked to see the condition of his car -- absolutely wrecked.

At the very next moment, he heaved a sigh of relief -- his car was insured. Though accidents do happen and what they typically highlight is the importance of going in for not just a personal accident cover but also an add-on family cover.

K Sridhar, managing director, Life Insurance Corporation, said people are often quite keen on and see only the need for protecting an inanimate object such as a car or a bike but fail to see the importance for taking a life cover for themselves or their family members.

An insurance expert says it is mandatory by law to take an insurance cover for a two-wheeler and a car. But, how many people riding a two-wheeler or driving a car have a personal accident insurance cover and more so, a family cover that comes along for a small premium!

An accident in a family can have major financial ramifications, which include permanent or temporary break from employment, additional expenditure to modify vehicle or residence to facilitate movement of the accident-struck, disabled member and cost of education if a child is unable to attend school on account of the accident.

An accident in the family - either to the primary earning member or to any other member - puts a huge, adverse impact on the family as a unit financially. And this is irrespective of earning capacities, says Arun Agarwal, CEO, Cholmandalam MS General insurance.

It is, therefore, imperative to buy a personal accident cover that protects the entire family with basic and add-on features available in a personal accident policy.

Insurance policies, available in the market today, offer comprehensive personal accident cover for a family with sum insured varying from Rs 500,000 to Rs 30 million.

K Krishnamoorthy, head of underwriting, Bajaj Allianz General Insurance, says most customers, who avail of a family cover, take it as an add-on cover under the householder policy rather than opting for a family insurance under personal accident cover.

He says a householder policy has about 11 features, of which fire and burglary are compulsory, while the remaining sections such as earthquake cover and personal accident cover are options left to the discretion of customers.

Krishnamoorthy says if a customer chooses more than four sections, which include a personal accident cover, a discount on premium payable is available to the customer.

Amol Phadnis, national manager-underwriting, ICICI [Get Quote] Lombard, says customers usually prefer covering their family under a householder policy.

Agarwal points out that though the family cover comes only as an add-on cover with a small additional premium, the awareness level among consumers about the family cover is remarkably low.

"Insurance agents do not push personal accident cover with a family cover as it comes with a little more premium, which means lesser commission and, therefore, try to push a comprehensive policy such as a householder's policy," says Phadnis.

Phadnis attributes the budget constraints of family as one of the key reasons for customers' preference. People prefer something like: when a family takes a loan from the bank against its house as a collateral, the bank automatically insures the house against fire.

Agarwal says Cholamandalam has been able to create a demand for both personal and family accident protection plans in the niche segment of high-income individuals, who are already sensitised to the vital need for insurance in their professional and personal financial planning.

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