Raj wanted to buy a term life insurance which would provide payouts if he got disabled someday due to an accident. Currently, his friend Tarun was disabled completely after he suffered head injuries in a bike accident. When Raj met his friend, who is a financial advisor told him that term insurance plans also had the option of a term rider, which provides certain benefits such as accidental total and permanent disability rider. Then, he bought a term policy with disability cover to secure his loved ones from any unfortunate events.Read more
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Any policyholder should first know the basics and salient key aspects of a term insurance plan:
A term insurance plan is a pure life insurance product that protects the family of an individual and offers financial protection to them in case of some uncertainties. Just like most insurance policies, a person pays a premium amount for a specified tenure. If the person dies during the policy tenure because of an accident or any medical issues, the nominee is paid a death payout equivalent to the value of plan. The premium amounts are calculated based on the medical conditions, life expectancy, and individual’s age. Insurers sometimes request the person to perform a medical examination before deciding the plan.
Along with offering death benefits to the family of the policyholder, a term plan offers tax benefits u/s 80C of the ITA, 1961.
Term plans also come with insurance riders that provide other benefits to the assured and his/her loved ones. A term rider is an additional benefit that is attached to a term plan and it provides you with extra profits towards the base plan offering. You can choose from these add-on riders while buying a term plan by paying an additional premium amount.
Importantly, a term insurance plan along with a term rider helps you to increase your term benefits. There are various term riders with a number of benefits to select from. The examples of some of the riders are:
Critical Illness Rider Benefit
Accidental Death Benefit Rider
Family Income Benefit Rider
Waiver of Premium Benefit Rider
Accidental Permanent Total or Partial Disability Rider Benefit
Family Income Benefit Rider
Accidental Total and Permanent Disability Benefit Rider: In this, the policyholder is offered with this benefit if the life assured is permanently and totally disabled due to an accident or mishap. The life cover is paid over ten equivalent installments. For instance, a policyholder can get 10 percent of the sum assured amount each year for the coming 10 years, as per the policy terms. This provides an income source to the policyholder for the coming ten years.
Let’s discuss some more information regarding disability coverage that can be attached to base term plans:
A disability occurs when the worker is not able to perform his/her job because of some limitation in the functioning of a body part. Disability varies with different insurers. Following things are considered a disability:
Loss of use of a leg
Loss of use of a one or both hands
Loss of vision in which you are not able to see from the eyes (blindness)
Loss of hearing i.e., inability to listen
Loss of speech – unable to speak because of injury in the vocal cords
The disability should have persisted without any pause for 6 months
Disability cover in a term plan with rider benefits covers physical disabilities that involve the dismemberment of arms, hands, legs, hearing, and vision. Additionally, the physical disability does not need to start instantly after the accident. Some insurers provide a time of 180 days from the accident date, at the time you can claim the rider for disability because of an accident.
Insurers provide various exceptions to the ATPD rider benefit. You cannot claim the accidental rider if you suffered from disability because of the following reasons:
If there are any signs of disability before or at the time of purchasing the term insurance
The benefit is withdrawn if the life assured is diagnosed with a disability due to self-harm or injury or under the impact of narcotics or alcohol.
The benefits are also revoked when such disability arises due to civil commotion, riots, war, rebellion, hunting, invasion, mountaineering, racing, steep clashing, bungee jumping, scuba diving, river rafting, paragliding, or other adventurous hobbies or sports.
Individuals employed in the para-military, armed forces, aeronautics, security agency, and flying are also not offered under this benefit.
In case the disability arises from any type of activity that is dangerous like attempting theft.
A term insurance plan is pure protection cover. This is one such plan that provides adequate protection at low premium rates. Adding disability coverage to a term plan means that you can add a large benefit amount without impacting the premium rates.
Let’s understand this with the help of an example:
You can add disability benefits up to Rs. 25 Lakhs to your 1 Crore term insurance policy. However, this benefit cannot increase the base life coverage of the primary plan.
So, add disability coverage to your term insurance plan so that you can receive:
Sufficient financial support in case of an unfortunate event
The cost of cover remains low
Now you know what is a disability cover and how can this help you, let’s take a look at the features and benefits of a disability cover.
Financial Protection: A disability coverage should make sure that the basic sum assured that comes along with the base plan will be paid to your family in case you pass away within the policy term. So, the disability rider benefit doesn’t lead to the cancellation of the death payout.
Waiver of Premium: This is another term rider in term insurance. In this, insurers waive the premium amount if the policyholder suffers from permanent disability due to an accident. This means that if the policyholder is not required to pay the future premium and all the benefits would continue to remain active. With this option, the financial stress on you or your family reduces while paying premiums if you have no income source.
As discussed, a term plan can be enhanced to provide coverage against disability. In order to do this, you are required to choose the accidental permanent total disability or partial disability rider benefit by paying a minimal additional cost and getting yourself additional security.
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