A Complete Guide on Accidental Benefit In Term Insurance
Updated On Jul 24, 2023
With uncertainties of life increasing with every passing day, families need a term life insurance policy that helps them to cope financially with the loss of a loved one. Term insurance policies are designed to financially protect the family of the deceased in case of the sudden demise of the policyholder. Premiums are set for the duration of such policies. In case the policyholder dies before the expiration date of the policy, the insurance company shall pay out the face value of the policy. There shall be no coverage or payout in case the term ends, and the policyholder dies before the end of the period.
Table of Contents
- Understanding Accidental Death Benefit Rider in Term Insurance
- Importance of Accidental Death Benefits in Term Insurance
- How does accidental death benefit rider work?
- Why get an accidental death benefit rider with term insurance?
- Exclusions of Accidental Death Benefit Rider
- Documents Needed for Claiming Accidental Death Benefit Rider
Term insurance policies often come with a variety of riders, ranging from critical illness rider and accidental death benefit rider to waiver of premium in case of critical illness. These riders are meant to enhance insurance coverage on the whole.
Understanding Accidental Death Benefit Rider in Term Insurance
Accidental death benefit rider is among the most prominent add-on features available in a number of term life insurance policies. This rider helps in augmenting the base coverage of term insurance and can even provide the policyholder’s nominee with an additional rider sum assured in case the policyholder passes away due to an accident.
Accidental death benefit rider can be added either at the time of purchasing the policy or at a policy anniversary, according to the policy T&Cs. This rider can be added to the term insurance policies at nominal premiums, which can be paid along with the base premiums.
Importance of Accidental Death Benefits in Term Insurance
A term life insurance policy offers the family of the policyholder a death benefit only when the policyholder passes away during the policy term. However, in many cases, people are unable to buy a term plan with an expansive life cover and financially secure their family with a suitable sum assured owing to diverse reasons. Hence, the accidental death benefit in term life insurance plans is among the best tools to ensure that your loved ones receive an additional rider sum assured on top of the base sum assured if the policyholders meet an untimely death due to an accident.
How does accidental death benefit rider work?
Here is an example to help you better understand how accidental death benefit riders work.
For instance, Mr. Mehta bought a term life insurance policy of INR 50 Lakhs with an accidental death benefit rider of about INR 15 Lakhs included in the base plan. If Mr. Mehta suffered an unfortunate death due to an accident during the policy term after five years, the insurance company would pay the base sum assured on death in addition to the rider sum assured of the accidental death benefit rider to the policy nominee. This means the nominee would receive INR 65 Lakhs to take care of their financial needs.
Why get an accidental death benefit rider with term insurance?
There are many advantageous aspects of buying Accidental Death Benefit Rider along with a term life insurance policy, including:
- Enhanced Financial Protection: The accidental death benefit in term insurance can provide an additional layer of financial protection for your loved ones in case of your accidental death. The nominee will get the base and rider sum assured payout if the policyholder dies due to an unfortunate accident. Basically, the nominee shall receive a larger amount of money, which can be used to meet various types of expenses, like paying the monthly rent, child's school fees, loan EMIs, and so on.
- Tax Benefits: Premiums are paid towards a term insurance policy, and riders qualify for tax exemptions. Provided that the premium payment does not exceed 10% of the sum assured, the life assured can avail tax exemptions for up to INR. 1,50,000 Lakh under Section 80C and 10(10D) of the Income Tax Act, 1961. The life assured can even double the tax benefits by investing in the accidental death benefit rider as premiums paid towards the rider qualify for tax exemptions under Section 80D of the Income Tax Act, 1961.
- No medical exam required: In most cases, you would not have to undergo any special medical tests to add the accidental death benefit rider to the base term policy. This helps the policyholder to avail extended financial protection for their family after their untimely death.
- Minimal documentation: You do not have to submit any additional documents to add the accidental benefit rider to the base-term life insurance plan. The life assured just has to provide simple personal details in the application form for the insurance provider to accept the application.
- Multiple payout options: The rider benefit amount shall be paid as a lump sum or in regular instalments under the accidental death benefit rider. This acts as a regular income for the family of the life assured. The nominee would have the flexibility to select the payout option as per their financial requirements and situation. If the nominee opts for a lump sum, the accidental death benefit shall be provided as a lump sum along with the death benefit. In case the nominee opts for regular instalments, the nominee would receive equal instalments for a fixed span of time along with the death benefit.
- Easy claim settlement process: Accidental death benefit claims can be settled easily by submitting the duly filled claims form along with the needed documents online without visiting the insurer's office. The majority of renowned insurers tend to settle the claims swiftly and easily to help the grieving family take care of their financial requirements.
Exclusions of Accidental Death Benefit Rider
There are a few common exclusions under which the term life insurance policy with accidental death benefit cover shall not provide a payout. You need to be aware of these exclusions before investing in a term insurance policy. A few of the most common exclusions include:
- Death that occurs due to an accident under the influence of liquor
- Death that unfortunately occurs due to an existing health issue
- Death due to overdose of alcohol, drug, alcohol, or psychedelic substances
- If death occurs due to pregnancy complications or during childbirth, in certain instances
- Any death that takes place due to participation in illegal activities
- Death due to self-inflicted injuries
- If the person commits suicide
- Death after the end of the waiting period, which generally comprises of 180 days
Documents Needed for Claiming Accidental Death Benefit Rider
Here are some of the most common documents needed to claim accident death benefit rider:
- Original policy documents
- Filled claim application
- Photo ID Proof
- Address proof of policyholder
- Bank account details of the policyholder
- FIR (copy or original)
- Police Inquest Report (copy or original)
- Postmortem Report (copy or original)
- Sub-Divisional Magistrate's Final Verdict
- Driving license of the life assured
You can expand the scope of coverage provided by your term life insurance policy by adding the Accidental Death Benefit Rider. It would ensure that loved ones will receive a lump sum payout not only for natural causes but also in the event of accidental death. Such comprehensive coverage ensures that your family is well protected from unforeseen circumstances.
- Can I buy an accidental death benefit rider for term insurance online?
Ans. Yes. You can easily invest accidental death benefit rider for term life insurance online. It is easy to add the rider to the base plan while purchasing the policy online. Accidental death riders can be added at nominal premiums payable with the base premium rates.
- What is the premium payment frequency for term insurance policies?
Ans. Insurance companies typically provide options for multiple premium payment frequencies, such as annual, semi-annual, quarterly, or monthly. You can select the one best suited to your needs.
- What is the difference between the death benefit and the accidental death benefit?
Ans. The death benefit implies the amount of the base term insurance paid to the nominee in case of the death of the policyholder due to any reason. On the other hand, the accidental death benefit is the additional rider amount paid along with the death benefit if the policyholder dies due to accidental reasons.
- What will happen if I miss paying the premiums for the term insurance policy?
Ans. The grace period will start after the end of the premium due date. If you do not pay the pending premiums even during the grace period, then your policy shall lapse, and no benefit will be paid to the nominee in case of an eventuality.
- What is the minimum and maximum entry age for a term insurance policy?
Ans. The minimum entry age for a term insurance policy is generally 18 years, while the maximum entry age can vary between insurance providers. Depending on the insurer's terms and conditions, the maximum entry point can be 65 years or lower.