Accidental Death Benefit in Term Plan: What Is It and Do You Need It?

What Are Riders in Term Insurance?

The Term Plan riders are essentially the benefits offered with a basic term life policy to provide supplementary coverage to the policyholder. Beyond the core death benefit, the Term Insurance riders introduce various supplementary benefits, enhancing the features of the Term Insurance Policy. Although most Term Insurance Policies offer rider options, the specifics, prerequisites, and costs of these riders fluctuate based on the Term Plan, premium, and insurance provider. Some riders come with the Term Insurance Plan without any additional costs, while others need to be purchased separately by paying a slightly extra premium.

Merely buying a Term Plan for a robust financial planning isn't sufficient. The Term Plan you buy needs to align with your lifestyle and financial requirements. While considering Term Insurance premium is essential, a basic and affordable Term Plan can be turned into a personalised Term Plan via Term Insurance riders. The capacity to customise the Term Plans as per the policyholders' needs is a prominent benefit of Term Plans. Moreover, when considering an online Term Plan, you can compare diverse riders to identify the one most suited to your needs.

What Is the Accidental Death Benefit Rider in Term Insurance?

The Accidental Death Benefit rider, an additional feature available in Term Insurance, amplifies the core coverage of the basic Term Plan. It extends an extra rider sum assured to the policy's nominee in the event of the policyholder's demise resultingf the policyholder's demise results from an accident. This rider can be incorporated either during policy initiation or at the time of renewing the policy, as per the policy terms and conditions. The rider can be bought with a slightly elevated premium. Notably, the rider sum assured will be disbursed only if the policyholder's demise takes place within the 180-day waiting period following the accident.

What Are the Features of the Accidental Death Benefit Rider in Term Insurance?

• A widespread misconception assumes that the sum assured is exclusively paid out in case of the policyholder's accidental demise, excluding other causes. However, this isn't accurate. The beneficiary remains eligible for the fundamental benefits of the Term Plan. This signifies that the basic sum assured is still disbursed if the policyholder passes away due to reasons other than an accident.

• The rider solely guarantees an added sum above the basic sum assured if the insured member dies in an accident.

• The sum assured of the Accidental Death Benefit rider can differ depending on the insurance company and depends upon the sum assured of the basic Term Plan.

• In certain scenarios, there could be an upper limit on the highest sum assured.

• The premium for the Accidental Death Benefit of a Term Insurance Policy remains constant throughout the policy's duration.

• The Accidental Death Benefit rider extends its coverage to various accident types beyond road accidents, including industrial incidents and plane crashes.

What Are the Benefits of Accidental Death Benefit Rider in Term Insurance?

1.Enhanced Protection against Uncertainties::

Accidents can significantly disrupt an individual's life. Hence, having an additional layer of protection makes sense for creating a contingency plan.

2.Financial Support for Family:

An Accidental Death Benefit rider offers a higher sum assured to your loved ones and provides crucial financial support during trying times.

3.Tax Benefit:

The premium paid for your Term Insurance Policy provides tax benefits under Section 80C of the Indian Income Tax Act, 1961.

4.Affordable Premiums with Online Term Plans:

Opting for an online Term Plan along with an Accidental Death Benefit rider not only lowers the premium but also allows individuals to do policy comparisons to ensure an informed decision.

What Aare the Exclusions of the Accidental Death Benefit Rider?

1.Suicide:

Instances of self-inflicted harm are not covered by the Accidental Death Benefit rider.

2.Self-inflicted Injuries:

Injuries caused intentionally by the insured person are excluded from the rider's coverage.

3.Drug Overdose Oor Alcohol Abuse:

Incidents involving drug overdose or excessive alcohol consumption are not covered under the rider.

4.Participation in Civil Commotion, Riots, War, Oor Rebellion:

The rider does not provide coverage for cases involving the insured's participation in civil disturbances, riots, or conflicts.

5.Death after 180 Days of the Accident:

Any death or disability occurring beyond 180 days from the accident date is excluded from the rider's coverage.

Why Is the Accidental Death Benefit Required in Term Insurance?

A Term Insurance Plan provides the policyholder's family with the death benefit solely if the unfortunate event occurs during the policy's term. However, due to various factors, individuals often struggle to secure a Term Plan with substantial life coverage, which results in leaving their family underinsured. Hence, the Accidental Death Benefit in Term Insurance comes out as a solution, ensuring an additional rider sum assured in addition to the base sum assured, should the policyholder's untimely demise be the result of an accident.

For instance, Sumit purchased a Term Plan with an insurance coverage of Rs 1 cr along with an Accidental Death Benefit rider with an insurance coverage of Rs 50 lakhs. After a few years of buying a Term Plan, Sumit met with an accident and lost his life during a policy term. In this case, the insurer will pay the death benefit of Rs 1 cr to the nominee along with an Accidental Death Benefit of Rs 50 lakhs. So, Sumit's nominee will receive a total of Rs 1.5 cr as insurance benefit.

Does a Basic Term Plan Cover an Accidental Death?

Yes, the basic Term Plans extend their coverage to accidental death. A Tterm Llife Iinsurance Pplan guarantees the payment of the sum assured regardless of the cause of death, whether it results from health-related issues or accidents.

However, choosing the Accidental Death Benefit rider offers the benefit of increasing the payout amount for your family if the cause of death is an accident. This supplementary benefit comes with a slight increase in the premium. Thus, it proves to be an affordable choice when compared to enhancing the basic Term Insurance coverage without this rider.

Does a Term Plan Accidental Death Benefit Provide Coverage for Disability?

No, a Term Plan or an Accidental Death Benefit do not provide coverage for disability. In order to cover disability, it is advisable to buy a separate rider - an Accidental Disability Rider.

If the insured experiences an accident resulting in total or partial disability, the Accidental Disability Rider benefit comes into play. Typically, over the subsequent 10 years, the policy will allocate a portion of the sum assured to the policyholder.

This rider is one of the important Term Plan accidental benefits, as it assists in compensating for the loss of the insured's income source. Accidents, while sparing lives, can lead to partial dismemberment or impairment, resulting in the loss of employment and addinged financial strain during an emotionally trying period for both the individual and their family.

Take note that the percentage of the sum assured and the duration of disbursement depends upon the severity of the disability, extent of loss, and other specific factors tied to the particular Term Insurance Policy.

Should You Buy an Accidental Death Benefit Rider?

A Term Insurance Plan with Accidental Death Benefit is usually suggested for individuals who are the sole breadwinners of their families and fall into one of the following categories:

• Engage in frequent work-related travels

• Work in hazardous environments

• Live in an accident-prone areas

However, accidents are uncertain occurrences that can affect anyone unexpectedly. Therefore, it's prudent to consider buying the Accidental Death Benefit rider when purchasing a Term Plan. This is because even individuals who don't work in hazardous conditions or travel extensively might still be subjected to a distressing accident. Adding this rider to your Term Insurance Plan will ensure an extra layer of protection.

To conclude:

Riders pertaining to accidents provide a shield against the life's unpredictability. Hence, buying an Accidental Death Benefit rider with a Tterm Llife Iinsurance Ppolicy is always advisable. In the unfortunate event of an accident, this rider provides an added layer of protection for both policyholders and their families. Despite its affordability, it presents a substantial financial safety cushion for individuals who require it the most.

However, before buying a Term Plan, it is advisable to thoroughly read and understand the terms and conditions of the Accidental Death Benefit rider. This rider can be combined with other types of riders to ensure a comprehensive insurance coverage tailored to fulfil the distinct requirements of the policyholder. Ultimately, this rider serves as a smart investment that can offer peace and financial steadiness to your loved ones during times of tragic events.

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KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

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This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.