Rohit wanted to get a term life insurance policy that would also pay payments if an accident rendered him incapacitated. Rajesh, a friend of his, recently underwent total disability following spinal injuries sustained in a car accident. Rohit went to see his financial consultant brother, who informed him that term life insurance plans had the option of a term insurance rider, which offered advantages such as an accidental complete and permanent disability rider. After that, he bought a term insurance plan with disability benefits to cover his family in case of any unforeseen events.
Let us understand what term insurance is.
A term insurance policy is a specially crafted life insurance plan that safeguards a person’s family and offers them financial security in the event of any unforeseen circumstances. Similar to other insurance policies, a premium is paid for a specific term. The nominee has assured a death benefit equal to the plan’s value in case the person passes away in that period due to an accident or illness. The health status, life expectancy, and age of the individual are taken into account while determining the premiums.
A term insurance policy provides the policyholder’s family death term insurance tax benefits as well as tax advantages under Section 80C of the Income Tax Act. Subject to other investments created by the individual, premiums up to 1.5 lakh rupees for the individual, the spouse, and the children may fall under this category. Payments of the death term insurance tax benefits to the nominee are not subject to tax under Section 10D.
Any subscriber can add term riders to an existing term insurance plan. At a small amount of the price of an insurance plan, this offers extra coverage on top of the current one.
• Benefit for accidental total and permanent disability riders
This benefit is added in most term insurance policies that include disability payouts in India. In this event, the subscriber benefits if the policyholder gets a total and permanent disability because of an accident. The amount guaranteed is paid in ten equal instalments. According to the policy’s requirements, a subscriber can earn 10% of the sum assured every year for the next 10 years. The insured will have a guaranteed revenue stream from this for the following ten years.
What forms a disability?
The term insurance with disability benefits contains a definition of disability. According to many insurers, being totally incapacitated means that the policyholder can no longer work or engage in any type of paid or gainful activity due to the injury. When a policyholder loses the power to use both hands, feet, eyes, or any combination of the three, this clause is activated. Six months must have elapsed, during which the disability was unbroken.
There are numerous exclusions to the accidental total permanent disability rider benefit offered by insurance carriers. If the policyholder gets handicapped due to self-harm or while using alcohol or drugs, the payout is cancelled. Further, the payment is denied when the handicap is brought on by civil unrest, riots, revolt, war (both declared and undeclared), invasion, any type of racing, bungee jumping, steeplechasing, river rafting, scuba diving, paragliding, parasailing or any other dangerous activities. The benefit is not offered to anyone who works for the military, paramilitary, security services, police, aviation, or the military.
• Disability benefit rider premium waiver
This is another term insurance rider in life insurance. In this case, insurance providers will not charge the policyholder any premiums if an accident results in permanent disability. The rider states that the benefits of the insurance, as outlined in the policy schedule, will continue to be in effect even after the policyholder is no longer obligated to pay all future premiums. In the case of a permanent disability rider, the above-mentioned definition of a disability and the rider’s exclusions continue to apply.
Disability Coverage Features in Term Insurance Plans
Now that you are aware of what disability insurance is and how it might benefit you let’s look at its features and advantages.
• Financial Protection: Disability coverage should guarantee that your family will receive the basic sum assured that is included with the base plan in the event that you die away within the policy term.
• Waiver of premium: Another term rider for term insurance is the waiver of premium. In this case, the insurers will not charge the insured any premium if an accident results in permanent incapacity. This indicates that all benefits would continue to be active even if the policyholder is not compelled to pay the subsequent payment.
It is very important to have a thorough understanding of what is term insurance to avail of benefits.