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Should You Buy Disability Rider with Term Insurance?

25-August-2021 |

When opting for a term plan, the investor is often asked whether they would like to strengthen their cover with an insurance rider#. Some riders cover health-related risks such as a critical illness rider, whereas some others protect against unforeseen scenarios such as a disability rider or an accidental death rider.

Insurance riders can transform a regular policy into a suitable term plan for an individual. However, a common question afflicting an insurance seeker is should I choose a disability rider with my term insurance? Before understanding the benefits of a rider in insurance, it is important to know what is an insurance rider.

 

Defining Term Insurance Riders

The objective of a term plan is to ensure the financial security of your loved ones against unforeseen scenarios. This risk-proofing of your financial plans can be further amplified with life insurance riders. An insurance rider is an add-on to your basic life cover. It is an amendment to your term plan that states that if something unfortunate were to happen under the conditions mentioned in the rider, an additional benefit is provided to the nominees.

A common misconception associated with term insurance riders is that if the conditions for an eventuality mentioned in the rider are not met, the basic death benefit is also not provided. However, life insurance riders simply ensure an additional benefit provided over and above the basic cover. This means that even if the policyholder passes away for any other reason than the one they have chosen the rider for, the nominees are still eligible to receive the death benefit of the basic term plan.

 

What is a Disability Rider?


In the unfortunate event that the policyholder meets with an accident that results in a permanent or partial disability, the disability rider comes into action. This rider comes with a waiver of the premium element, which means that in the event of a disability owing to an accident, the premiums for your term insurance are waived off, and the policy continues to remain active until maturity.

This rider takes into consideration that disability can lead to an income loss. Some policies also provide a certain percentage of the sum assured to the insurance holder for a specific period acting as an income replacement. To purchase this rider, the insurance seeker is expected to pay a slightly higher premium amount than regular insurance protection.

In the absence of this rider, if the policyholder is rendered disabled due to an accident and is unable to make the premium payments, the policy would automatically expire on non-repayment of dues, leaving you and your loved ones without a financial cover. It is important to bear in mind, however, that the rider is activated only if the insured member is disabled due to an accident.

 

What Qualifies as a Disability?


It is important to be completely aware of the terms and conditions associated with the insurance policy you invest in. The definition of what qualifies as a disability because of an accident is mentioned clearly in the policy documents.

Most insurance providers interpret disability as the inability to perform substantial occupational duties. Moreover, the disability rider will only come into action if the disability is caused owing to an accident. Pre-existing medical conditions of the policyholder are excluded from the cover. However, it is important to re-look at the definition of disability as it may change with time.

 

Why do you Need a Disability Rider?

 

It is not uncommon to hear of accidents regularly. Even if you are a safe and cautious driver, an accident can occur with anyone. Here are the reasons why one needs a disability rider:-

  • If you are a frequent traveller: Several individuals have to travel frequently owing to the nature of their work. This naturally increases the probability of encountering a mishap when journeying to your respective destination. Considering this, having a disability rider with your term insurance will prevent matters from becoming worse due to financial constraints. If an individual with a disability rider faces a permanent or even temporary disability, their insurance will act as an income supplement in these testing times so that they can focus on their health without excessive worries about their finances.

  • Rising number of accidents: Despite having only 1% of the world’s vehicles, India accounts for 11% of global deaths in road accidents. This is the highest number in the world for road accident fatalities. At an individual level, accidents resulting in disability – whether it is partial or permanent – impose severe financial concerns pushing several families into debt. To prevent this from happening, a comprehensive insurance policy becomes important as it acknowledges at least the financial aspect of dealing with the unfortunate circumstance. 

 
Benefits of Disability Rider

Term insurance riders aim to strengthen a basic policy cover to transform it into the best term plan for an individual. By analysing the benefits of a rider in insurance, one can make an informed purchase for wholesome financial protection. Following are the benefits of disability rider:-

  • It covers both permanent as well as partial disability.

  • It waives off the premium while keeping the insurance active in case of an accident-related disability.

  • It acts as an income replacement by providing a certain percentage of the sum assured for a specified duration.

  • It provides additional financial protection to your family in your absence.

  • Rider benefit payout can be taken as a lumpsum, as an income for a period up to 10 years, or a combination of both.

 

Tata AIA term insurance plans acknowledge the diverse financial requirements of individuals and have specially curated protection plans to meet them at different stages in life. Insurance seekers can opt for the Tata AIA Life Insurance Accidental Death and Dismemberment (Long Scale) (ADDL) (UIN- 110B028V03) Rider that will fill the financial gap in the event of the policyholder’s demise.

Additionally, the rider will ensure that in the event of dismemberment, or loss of bodily functions or burns due to an accident, the nominees receive a percentage of the rider sum assured.

 

To conclude

A disability rider# is a great financial cushioning as it covers the expenses occurring due to an accidental disability while also waiving off the premium to provide an insurance cover. However, it is important to be aware of the terms and conditions of the policy for making an informed insurance purchase.

 

L&C/Advt/2021/Sep/1672

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Disclaimers
  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not guaranteed issuance plans, and they will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • #Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums, and exclusions under the Rider, please contact Tata AIA Life's Insurance Advisor/ branch