Do You Need to Get Accident Insurance?

Very few Filipinos bother to buy insurance against bodily injury caused by an accident,
By Carlos Gonzales

Last October 2008, Dr. Francisco Sarabia was driving along EDSA when a speeding Joanna Jesh bus hit his car with such impact that it burst into flames. The doctor was trapped and charred to death.

The news came as a shock, as so many similar vehicular accidents and deaths reported practically every day. What is just as shocking is a recent announcement by the Department of Health: road accidents are now the fourth leading cause of death in the Philippines. If the trend continues, health officials fear that road accidents could become the leading cause of deaths in the country by the year 2020.

Reports from the Philippine National Police are anything but reassuring. In 2006, an average of 41 traffic accidents occurs every day, caused by driver’s errors, vehicle’s mechanical defects, over speeding, self-accident, and use of cellular phones while driving. That year, traffic accidents resulted to 674 fatalities, 3,767 injuries, and 10,623 reported cases of damage to properties.

A study by the UP-National Center for Transportation Studies is even more frightening. The report entitled “Socio-economic Cost of Road Vehicular Accidents” noted that “with more than half a million Filipinos involved in vehicular accidents each year, the statistics show accidents reaching epidemic proportions.”

It found out that a total of P3.5 million is lost per fatal accident, “which includes lost outputs of casualties amounting to P2.5 million and a significant sum for pain grief and suffering at P506,450.”

And those are just accidents that happen on the road. The Department of Labor and Employment has sounded the alarm over the recurrence of fatal work-related accidents, following the death of workers at the Korean firm Hanjin Heavy Industries and Construction in Subic Bay Freeport. One fell from a roof while the other worker was allegedly electrocuted while working at the firm’s motor pool.

An old report by the National Objectives for Health of the DOH revealed that deaths caused by accident contributed 4.6% of the total deaths in the Philippines. Morbidity and mortality from accidents and injuries increased in the last two decades. And more than a decade since that report, it is very likely that the trend continues upwards. The top causes of accidental death are motor vehicle accidents; submersion, suffocation, and foreign bodies; intracranial injury; fractures, dislocations, sprains and strains; and accidental falls.

Obviously, accident can happen anywhere – at work, on the road, at home, even in the air or at sea. Yet, despite the grim statistics on fatalities due to accidents, Filipinos remain fatalistic.

There is no better evidence than this than the number of Filipinos with accident insurance. And that is 1%. The vast majority are not insured at all. Personal accident insurance accounts for only about 4% of the total insurance business in the business.

Personal accident insurance provides benefits or indemnity in case of losses to the person or physical well-being of an individual which arise out of an accident. If you fall and injure yourself at work, lose the use of your legs due to a car accident, or die in a plane crash, personal accident insurance kicks in.

Various shapes and forms
Personal accident policies are actually relatively new in the Philippines. In other countries such as the United States, the more popular form is disability insurance. Here, for the longest time, accident insurance was available only as a rider or extension to a life insurance policy. If you’ve been sold a policy, you probably have been convinced to add a few hundred or so pesos to your premiums to avail of what the industry calls an Accidental Death and Disability (ADD) rider.

Another common way of having accident insurance is through your comprehensive auto insurance. Personal accident or PA insurance is already included, covering you and usually up to five passengers against bodily death and injury when you get into a car accident. It indemnifies you and your passengers for accidental death, dismemberment, burial, and medical expense.  Again, it’s usually just a few hundred pesos for a typical P100,000 or P250,000 coverage.

If you work for a company generous with benefits, it’s also possible you have group accident insurance as part of your menu of perks. When you go on vacation abroad, your travel agent will likely sell you travel insurance for a measly amount. That’s another form of accident insurance, with some other extras like thrown in, such as compensation for loss of luggage or trip cancellation and reimbursement for medical expenses.

Yet another way is when you open a savings deposit at your bank with a built-in free accident insurance, sometimes with a coverage equivalent to your initial deposit. And because premiums are quite cheap, it’s common to receive a free accident insurance policy for P25,000 from your friendly neighborhood insurer for a chance to listen to their one-hour sales pitch.

Nowadays, non-life insurance companies sell standalone PA policies to individuals, families, and companies. They are typically written on an annual basis. But some are limited by a certain period (like travel insurance), demographic (for students only), or location (for accidents that occur at work).

Run for cover
Unlike just disability insurance, PA policies cover more. Here are the benefits offered by accident insurance:

1. Accidental Death Benefit. The key difference is that accident insurance offers an accidental death benefit, which pays the principal sum for loss of life due to an accident. The sum insured of course depends on how much you’re willing to pay. There is definitely an overlap if you already have life insurance, which gives a death benefit, subject to some similar exceptions like suicide, whether or not it’s due to an accident.

2. Disability Benefits. This part of the policy is the most morbid, with its detailed listing of body parts and the corresponding percentage of the principal sum you’ll receive. Lose both feet? Congratulations, you’ll get everything! Just your thumb? No such luck, you’ll only get 15%. Worse, if you lose just a toe except your big toe, you’ll only receive 1%.

Without being facetious, this table does seem fair. You’ll be compensated according to the severity of your disability, as long as it’s permanent, which means actual severance or total loss of use of a limb.

If you lose the use of both arms or hands, both legs or feet, one arm or one hand and of one leg or foot, or if you are completely paralyzed, or get totally blind that you cannot work at all, it is considered “Total Permanent Disablement.” Otherwise, it is considered “Partial Permanent Disablement.”

Loss of    %
life    100%
entire sight of both eyes    100%
both hands or both feet    100%
one hand and one foot    100%
either hand or foot & sight of one eye    100%
arm at or above elbow    70%
leg at or above knee    60%
one hand at or above wrist    50%
one foot at or above the ankle    50%
hearing of both ears    50%
sight of one eye    50%
four fingers and thumb of one hand    50%
four fingers    35%
hearing of one ear    25%
all toes on one foot    25%
thumb    15%
index finger    10%
middle finger    6%
ring finger    5%
big toe    5%
little finger    4%
metacarpals 1st or 2nd (additional)    3%
metacarpals 3rd, 4th or 5th (additional)    2%
any toe other than big toe, each    1%

3. Medical Benefits. You also get reimbursement for medical and surgical treatments for injuries you suffer from due to an accident, subject to a limit in respect of any one accident.

4. Burial Benefit. If you die as a result of an accident, the policy pays the cost of burial expenses.

5. Weekly Indemnity. This is a bonus since you won’t be able to work and earn income. This benefit pays the amount selected up to 52 weeks in the event of total disability usually starting within 180 days from the date of accident.

There are of course exceptions as with any type of insurance. The typical situations where injury due to an accident won’t be compensated for are suicide; insanity; illness; disease; being under the influence of alcohol or drug; riot, civil commotion, insurrection, or war; pregnancy, childbirth, miscarriage or abortion; some specifically identified extreme sports; and certain identified occupations. These days, some insurers have included or offer as an extension a Murder & Assault benefit, which pays a fixed amount for death due to unprovoked murder and assault.