Does life insurance cover disability

Deven wanted to purchase a life insurance term which would also provide benefits if he was disabled because of an accident. Recently, his friend Mahesh was completely disabled after the latter suffered spinal injuries in a road accident. Deven went to meet his brother, a financial consultant, who told him life insurance term plans had the option of a term insurance rider, which provided benefits like accidental total and permanent disability rider. He then purchased a term insurance policy with disability benefits to protect his family from any unforeseen circumstances.

Any subscriber must first understand the basic and key features of a term insurance policy.

What is a term insurance policy?

A term insurance is a specifically designed life insurance policy that protects an individual’s family and provides them financial security in case of any eventualities. Like most insurance plans, an individual pays a premium for a given term. If the individual passes away during that term because of an accident or due to health reasons, the nominee is assured a death benefit equal to the value of the plan. The premiums are calculated on the basis of the health conditions, the life expectancy and the age of the individual. Insurers often ask the individual to conduct a medical check-up prior to finalising the policy.

Along with providing death benefits to the policyholder’s family, a term insurance policy offers tax-saving benefits under Section 80C of the Income Tax Act. Premiums up to 1.5 Lakhs including for the individual, the spouse, and the kids can fall under this category subject to other investments made by the individual. Death benefit pay-outs to the nominee are exempt from tax under Section 10D.

What is a term insurance rider?

Any subscriber can top the existing term insurance plan with term riders. This provides additional coverage on top of the existing plan at a fraction of the cost of the insurance plan. A term insurance rider is an attachment to an insurance policy which supplements the existing coverage. There are several riders in a policy like accidental death rider benefit, accidental total and permanent disability rider benefit, critical illness rider benefit and waiver of premium on disability rider benefit.

Accidental total and permanent disability rider benefit:Most insurance companies in India provide this rider as part of any term insurance policy with disability benefits. Here, the subscriber is provided with the benefit if the policyholder is totally and permanently disabled because of an accident. The sum assured is paid over 10 equal instalments. For example, a subscriber can receive 10% of sum assured each year for the next 10 years, according to the terms of the policy. This will provide the policyholder with a source of income for the next 10 years.

What qualifies as disabled?

The definition of disabled is included in the term insurance policy with disability benefits. Many insurers define completely disabled as when the policyholder, because of an accident, has been rendered totally incapable of being employed or engaged in any work or occupation whatsoever for remuneration or profit. This clause is invoked when a policyholder suffers a total and permanent loss of the use of both hands, or both feet, or both eyes, or a combination of any two. The disability must have lasted without any interruption for six months.

Exceptions to the permanent disability rider: Insurance companies provide many exceptions to the accidental total permanent disability rider benefit. The benefit is revoked if the policyholder suffers the disability because of self-injury, or while under the influence of alcohol or narcotics. The benefit is also denied when such disability arises because of riots, civil commotion, rebellion, war (both declared and undeclared), invasion, hunting, mountaineering, steeplechasing or racing of any kind, bungee jumping, river rafting, scuba diving, paragliding or any adventurous sports or hobbies. People employed in the armed forces, para-military, security agency, police, aeronautics and aviation are also not provided with the benefit.

Waiver of premium on disability rider benefit: This is another term insurance rider in a life insurance. Here, insurance companies waive the premiums if the policyholder suffers permanent disability because of an accident. The rider means that even as the policyholder is no longer required to pay all future premiums, all the benefits of the policy, as per the policy schedule, would continue to remain in force. The definition of disability and exceptions to the rider remains the same as mentioned above in the case of permanent disability rider.

Any individual is required to read the details of the life insurance term policy and the term insurance riders, including the fine print before zeroing in a term insurance policy with disability benefits. Paying the added cost for the rider should be considered after studying the policy in detail

One such term plan providing many riders is the Future Generali Flexi Online Term Plan .