Recently, Deven’s friend Mahesh was completely disabled after he suffered from a terrible accident. Seeing his terrible pain and difficult financial situation, Deven was very saddened and wondered if anyone could protect themselves and their family members from the financial strain of such an incident. “Life and accidents are not in our hands,” he thought, “but can’t we think ahead and create a safety net for such kind of situatons?”

Answering his question, DevenÂ’s brother, a financial consultant, told him that certain life insurance plans also provided provide optional riders like accidental total and permanent disability, term plans most commonly offers such rider benefits.. This sounded like the answer to his worries and Deven decided to understand these riders in detail. He started by understanding the basics of a term policy.

What Is a Term Insurance Policy?

A term insurance is a specifically designed life insurance policy that protects an individualÂ’s family and provides them financial security in case of any eventualities. Like most insurance plans, an individual pays a premium for a given term. If the individual passes away during that term because of an accident or due to health reasons, the nominee is assured with a death benefit equal to the value of the plan. The premiums are calculated on the basis of the health conditions, the life expectancy and the age of the individual. Insurers often ask the individual to conduct a medical check-up prior to finalising the policy.

Along with providing death benefits to the policyholderÂ’s family, a term insurance policy offers tax-saving benefits under Section 80C of the Income Tax Act, according to the provisions of Income Tax laws, as amended from time to time. The overall limit of exemption under Section 80C can extend up to only 1,50,000 INR. Death benefit pay-outs to the nominee are exempt from tax under Section 10D.

What Is a Rider?

Certain plans provide additional benefits called riders. These riders can be bought as an addition to an insurance policy which supplement the existing coverage. Depending on the riders provided by the insurer and their protection goals, the policyholder can top up the existing insurance plan with the riders of their choice.

They are also cost effective as they provide additional coverage over and above the existing plan at a fraction of the cost of the insurance plan. There are several riders options available in the market like accidental death benefit rider , accidental total and permanent disability rider benefit, critical illness rider and waiver of premium on disability rider.

The rider Deven was looking for was:

Accidental total and Permanent Disability Rider: Most insurance companies in India provide this rider as part of their insurance policies. Here, the policyholder is provided with defined benefit if the policyholder is totally and permanently disabled because of an accident.

Term insurance companies give their policyholders the flexibility to choose how they would like to receive the disability rider benefit. Usually, the options given in the riders are:

• The entire rider benefit payout in a lump sum.
• The benefit payout can be a regular income throughout the designated policy tenure.
• The benefit may be paid out for the term period till the survival of the policyholderÂ’s spouse.
• Insurance companies may also waive off the premiums if the policyholder suffers from permanent disability and all the benefits of the policy, as per the policy schedule, continue to remain in force.

One such plan providing the Accidental Total and Permanent Disability Protection rider, is the Generali Central Flexi Online Term Plan . In this term plan, if the policyholder faces the unfortunate issue of disability then all future premiums under the policy are waived off and the policyholder receives the benefit equal to Rider Sum Assured in 10 equal instalments. For example, a subscriber can receive 10% of rider sum assured each year for the next 10 years, according to the terms of the policy. This will provide the policyholder with a source of income for the next 10 years.

What Qualifies As Disabled?

The definition of disabled is included in the term insurance policy with disability benefits. Many insurers define that the Life Assured will be regarded as Totally and Permanently disabled if, it is the result of accidental bodily injury, caused by outward, violent and visible means, rendering the Life Assured totally incapable of being employed or engaged in any work or occupation whatsoever for remuneration or profit. This clause is invoked when Life Assured suffers a total and permanent loss of the use of both hands, or both feet, or both eyes, or a combination of any two. Additionally, this disability must have lasted without any interruption for at least six months.

Exceptions to the permanent disability rider: Insurance companies may provide exceptions to the accidental total permanent disability rider benefit. The benefit may not be payable if the disability is due to listed reasons. There are few common exclusions:

1. The policyholder suffers the disability because of self-injury, or while under the influence of alcohol or narcotics unless prescribed by a doctor.
2. The disability arises because of riots, civil commotion, rebellion, war (both declared and undeclared) or invasion.
3. Disability is due to accident in adventure sports like hunting, mountaineering, steeplechasing or racing of any kind, bungee jumping, river rafting, scuba diving, paragliding or any other adventurous sports or hobbies.
4. If the accident is due to committing any breach of law with criminal intent, then it is excluded.
5. If accident due to nuclear reaction, radiation or nuclear or chemical contamination.

For detail exclusion, Please refer to the Policy Document of the specific Rider.

Conclusion:

People choose insurance to provide a safety cover in their lives. Riders are a great way to add to that cover at a low cost. While choosing your policy, do check on the riders available and donÂ’t forget to read the fine print before zeroing in a term insurance policy with disability benefits. To understand which policy works best for your particular needs & how, you can visit our website or talk to our trusted and experienced advisors.