In Unit Linked Insurance Policies, the investment risk is borne by the policyholder. These insurance products do not offer any liquidity in the first 5 years, as they have a mandatory lock-in period of 5 years. During this period, the policyholder cannot fully or partially withdraw the invested amount or surrender the policy.
Permanent Disability Rider in ULIP
ULIPs provide an investor with the option to customise their ULIP by attaching several riders on top of their base plan. A permanent disability rideris an optional add-on which pays benefits to the policyholder if they become totally and permanently disabled due to any accident.
A permanent disability rider in ULIP plan is an add-on that, if added to your base plan, provides financial protection to the policyholder and their family in case the policyholder becomes totally and permanently disabled due to an accident. Since a ULIP already combines an investment and insurance, the permanent disability rider adds another layer of protection in case the policyholder is not able to earn a sustainable income due to any disability.
How Does the Permanent Disability Rider Work in ULIP?
The permanent disability rider acts as a safety net and pays out an extra benefit to the policyholder if they are met with an accident and are left permanently and totally disabled. Let us understand how the rider works.
Attaching the rider: When buying the ULIP, you can opt to attach the rider to your ULIP. You will be required to pay a nominal additional premium along with your base premium.
The triggering event: The rider is triggered if the policyholder is left permanently and totally disabled due to any accident during the policy term. It is essential to note that the rider becomes eligible for a claim as per the terms and conditions of the plan of your choice.
Waiting period: The waiting period for any ULIP is defined by the terms and conditions of your insurer. Generally, insurers require the policyholder to survive the accident for a minimum period of 180 days before the disability is considered permanent and total and the claim is released.
Filing the claim: When filing the claim, the nominee is required to submit medical evidence as proof of the policyholder's disability.
Benefit payout: Once approved, the insurer settles the claim in one of three common ways:
Waiver of premium: The insurer can waive all further premiums of the ULIP. This means that any further premiums are taken care of by the insurer and the policy keeps on running.
Lump sum payment: A lump sum payment equal to the rider sum assured is provided to the policyholder.
Income benefit: Rather than a lump sum payment, the payout is spread across years and paid as regular income to the policyholder.
Policy continuity: Irrespective of the payout structure of the rider benefit, the ULIP policy continues and can be used to fulfil long-term financial goals.
What Does a Permanent Disability Rider Cover?
The core problem that a permanent disability rider aims to solve is to replace the income-earning capacity of the policyholder, as the policyholder cannot provide for themselves due to total and permanent physical disability.
The permanent disability rider generally covers the following
Total and permanent disability caused by an accident
Loss of physical function severe enough to prevent employment
What are the Exclusions Under the Permanent Disability Rider Cover?
While the rider aims at providing financial support to individuals who are no longer capable of earning for themselves and their families, there are certain exclusions under the rider.
Partial or temporary disability
Disability arising from illness
Any disability due to self-inflicted injury
Disability due to participation in hazardous activity
Pre-existing medical conditions
What Are the Benefits of a Permanent Disability Rider in ULIP?
Continuity in Income: The insurer might provide the policyholder with a premium waiver or a lump sum payment, ensuring that the policyholder is not left without any financial support.
Policy continuation: The policy also continues if the waiver of premium is put into effect and the invested money keeps on growing until the policy matures
Protection of long-term goals: Long-term goals are protected irrespective of the policyholder being able to pay the premiums throughout the policy term.
Cost-effective nature: The rider is priced lower than purchasing a standalone disability insurance policy.
Payout flexibility: Insurers provide different payout structures, and the policyholder can choose any of them as per their convenience.
Permanent Disability Rider vs Other Riders
Let us compare the permanent disability rider with some other riders to understand the best for you.
Rider Type
Rider Coverage
Trigger Event
Payout type
Permanent Disability Rider
Total and permanent physical disability due to an accident
Disability caused by an accident
Waiver of premium, lump sum, or income instalments
Accidental Death Benefit Rider
Death caused by an accident
Accidental death
Lump sum is paid to the nominee
Critical Illness Rider
Diagnosis of any critical illness as specified by the insurer
Diagnosis of a critical illness
Lump sum is paid to the policyholder
Waiver of Premium Rider
Future premiums are waived if the policyholder is left unable to pay future premiums
Death/disability/illness of the policyholder
Future premiums waived; policy continues
Conclusion
The permanent disability rider is one of the best riders you can attach to your ULIP as it protects you and your family in the event of a permanent disability. Riders can help you fully optimise your ULIPs and ensure that you and your family remain protected irrespective of the circumstances.
Does a Permanent Disability Rider cover partial disability?
No, a permanent disability rider does not cover partial disability and is designed to cover only permanent and total disability. Partial disabilities like loss of vision and temporary impairment are not included under this rider.
Does a Permanent Disability Rider cover accidental disability?
Yes, permanent disability riders are generally designed to cover accidental disabilities.
Does a Permanent Disability Rider cover disability caused by illness?
No, permanent disability riders generally do not cover disability caused by illness. However, it is recommended to check with your insurer to ensure whether disability caused by illness is covered under the rider offered by your plan.
Can a Permanent Disability Rider claim be rejected?
Yes, a claim can be rejected if the disability does not match the insurer’s specific defined list of conditions or if the claim does not match the terms and conditions as specified by your insurer.
Can a Permanent Disability Rider be added after buying a ULIP?
You can generally buy a disability rider after buying a ULIP. You can do so at a later policy anniversary; however, it is essential to check with your insurer to ensure that the facility is available under your ULIP.
Grow your wealth & meet your Financial goals
Systematically Invest in high growth plans with returns upto
18%*
Disclaimer: Policybazaar Insurance Brokers Private Limited does not endorse, rate or recommend any particular insurer or
insurance product offered by an insurer.
˜The insurers/plans mentioned are arranged in order of highest to lowest first year premium (sum of individual single premium and individual non-single premium) offered by Policybazaar’s insurer partners offering life insurance investment plans on our platform, as per ‘first year premium of life insurers as at 31.03.2025 report’ published by IRDAI. Policybazaar Insurance Brokers Private Limited does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the IRDAI website www.irdai.gov.in *All savings are provided by the insurer as per the IRDAI approved insurance
plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs. ++Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
