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Accidental Death Benefit Rider in Term Life Insurance
Riders serve as a crucial supplement to the life insurance policies. They offer an additional protection layer covering unexpected events requiring financial support.
Among the various riders in life insurance, the accidental death benefit rider stands as one of the most important ones. It provides an additional sum assured to the beneficiaries in case of accidental death of the policyholder, thus ensuring comprehensive financial protection for the future.
Read on to learn more about the accidental death benefit rider.
Table of Contents
What is Accidental Death Benefit Rider in Term Insurance?
Accidental death benefit rider provides an additional payout to the beneficiaries of the policy if the policyholder dies due to an accident. This payment is in addition to the death benefit already provided by the base policy.
Though every death shatters the family emotionally and financially, accidental deaths hit more on every level. They are accompanied by additional financial requirements and stress for the family owing to the complex medical processes involved while trying to save a life.
The accidental death benefit rider is especially beneficial for individuals working in high-risk jobs or those who frequently travel. It covers road accidents, homicides, death due to falling from height, death from fire, plane crashes, train accidents and the like.
Is It Necessary to Buy Term Insurance with Accidental Death Benefit Rider?
No, it's not necessary to buy an accidental death benefit rider in term insurance. It is an optional rider that can be added to your base policy for a nominal premium.
However, adding an accidental death benefit rider in term insurance to your policy ensures that your financial coverage is enhanced to include any unforeseen accidental death.
What is Considered as Accidental Death in Term Insurance?
In term insurance, accidental death means when a person dies because of an unexpected and non-deliberate external event.
This typically excludes deaths caused by natural causes, illnesses, self-inflicted harm and other exclusions as mentioned in the policy.
For a death to be classified as accidental, it must be confirmed that the fatal incident was sudden, unforeseen and involuntary. For example, deaths resulting from car accidents, drowning and accidents involving machinery or equipment.
However, the specific definitions and exclusions can vary significantly across different insurance policies and insurers.
How Does Accidental Death Benefit Rider in Term Insurance Work?
Any unforeseen event that causes bodily injury to a person, ultimately resulting in the death of the person within 180 days of the accident, is covered under the ADB rider in the case of an accidental death. Here is how it works:
- Purchase the Rider: When you buy a term insurance policy, you can add an accidental death benefit rider with an additional premium, depending on factors like age, occupation, and the coverage you choose.
- Accidental Death: If you die as a result of an accidental covered by the policy, your beneficiaries will receive the sum assured under your term insurance policy, plus the additional amount specified in the rider.
- Benefit Payout: The payout is typically a lump sum amount that can be used to cover funeral expenses, debts or provide financial support to your family.
Understanding Term Insurance with Accidental Death Benefit Rider with Illustration
Let us take the example of Mr. Rohan.
Rohan, a 30-year-old, takes a term plan of ₹1 crore for 30 years of policy tenure, and his wife is the nominee for this policy. Rohan also adds an ADB rider that promises an additional ₹20 lakhs if he dies due to an accident.
Scenario 1: Natural Death During the Policy Term
If Rohan passes away during the 20-year term of the policy, his nominee will file a claim with the insurance company. After successfully processing the claim, Rohan’s nominee would receive the sum assured of ₹1 crore, which would help them cover living expenses, pay off debts, or invest for future needs.
Scenario 2: Accidental Death During the Policy Term
If Rohan met with a road accident when he was 40, his hospital expenses would amount to around 18 lacs. Unfortunately, his death occurred, and then his beneficiary will be paid a total death benefit of ₹1.2 crores, that is ₹1 crore from the term plan and ₹20 lacs from the accidental death benefit rider.
Scenario 3: Outliving the Policy Term
If Rohan outlives the 30-year term of the policy, the term plan typically does not provide maturity benefits, meaning he would not receive any payout.
Difference Between Death Benefit and Accidental Death Benefit in Term Insurance
A term insurance policy pays out money when the policyholder dies, no matter the cause. An accidental death benefit, however, only pays out if the death is due to an accident. If you have an accidental death benefit rider and die from natural causes or illness, this extra coverage won't apply.
But if you die from an accident, such as a car crash or a fall, your beneficiaries could get double the policy's amount, often called "double indemnity." Understanding these differences helps you choose the right coverage for your loved ones.
What is Covered in Accidental Death Benefit Rider in Term Insurance?
Car or Traffic Accidents
Death due to a car accident or similar traffic incident is covered under the accidental death benefit rider.Aeroplane Crashes
Death in an aeroplane crash is covered under the accidental death benefit rider.Injuries from Falls
Death from an injury sustained in a fall is included in the accidental death benefit rider.Firearm Accidents
Death caused by a firearm accident is covered under the accidental death benefit rider.Fire Injuries
Death from injuries sustained in a fire is included in the accidental death benefit rider.What is Not Covered in Accidental Death Benefit Rider in Term Insurance?
Though term insurance with an accidental death benefit rider mainly covers cases of accidental death, there are some kinds of accidental deaths that are excluded from its coverage. Though the list might differ a little across insurers, however, majorly, the death should not be caused by an accident due to:
- Self-inflicted injuries, including suicide attempts, irrespective of mental health status.
- Deaths related to the consumption of drugs, alcohol, or other substances.
- Deaths occur as a result of war or invasion, even in the absence of an official war declaration.
- Flying, except when you are a fare-paying passenger on a commercial airline or serving as a member of the airline’s crew.
- Deaths arising from involvement in illegal or criminal acts.
- Deaths during participation in professional sporting events or hazardous activities such as diving, horseback riding, or underwater pursuits.
Additionally, any exclusions outlined in the standard life insurance policy document.
Features and Benefits of Accidental Death Benefits Rider in Term Insurance
Minimal Documentation
Adding the accidental death benefit rider is easy. You don’t need a lot of paperwork or extra steps. Just fill out an application form when you buy your life insurance policy.Enhanced Protection
Riders like the accidental death benefit give you extra coverage. They provide additional financial support in various situations, helping to protect your loved ones even more.Financial Support
If the insured person dies in an accident, this rider pays a lump sum to the nominee (the person chosen to receive the money). It helps the family with immediate financial needs like bills, loans, or funeral expenses.Quick Payout
If the insured person dies in an accident, the ADB Rider usually pays out quickly, providing much-needed financial help to the family during difficult times.Tax Benefits
You can get a tax deduction for the premiums you pay for a life insurance plan under Section 80C of the Income Tax Act, 1961. You can add an accidental death benefit rider to your policy for extra protection, which also qualifies for a tax deduction.Additional Coverage for Unforeseen Events
An accidental death benefit rider provides additional coverage to the policyholder's family in case of an untimely death due to an accident.
Since accidents might bring unexpectedly high medical costs with them, this rider ensures that the family is provided with an additional lump sum amount to help them cope with the medical expenses.
Affordable Premiums
The accidental death benefit rider is available at an affordable premium rate. It can be purchased as an add-on to the base policy for a nominal extra premium and is a cost-effective way to add an extra layer of protection to your life insurance policy.Flexibility
While base life insurance policies have uniform features for all, riders are a flexible and effective solution to customising your policy as per your risk profile and requirements. If you are in a risky work profile and more prone to accidents, you can consider adding an accidental death benefit rider to your life insurance policy.
Depending on the insurer's terms and conditions, it can be added at the time of policy purchase or later. The coverage amount can also be customised as per your requirements.
Peace of Mind
Adding an accidental death benefit rider to your life insurance policy can give you peace of mind, knowing that your family will be taken care of in case of an accidental death.
We usually plan our insurance coverage after evaluating a lot of factors. That sum assured is meant to take care of the dependents' financial goals and other liabilities in case of your untimely demise.
However, in case of accidental death, the extra medical expenses might hit your coverage plan.
Who Should Buy a Term Insurance with Accidental Death Benefit Rider?
1. Frequent Travelers
Individuals who often travel, especially to high-risk areas, must buy an accidental death benefit rider to ensure extra protection.2. High-Risk Job Holders
People working in hazardous environments, such as construction or mining, should consider this rider for added financial security in case of any unfortunate accident.3. Primary Breadwinners with Dependents
If you're the primary breadwinner and have dependents, this rider can provide additional financial support to your family in the unfortunate event of your accidental death.4. Regular Commuters
People who commute regularly for long distances, especially on two wheelers, must consider adding this rider to their life insurance policy.5. Young Adults
Individuals between the ages of 20 and 65 who want to ensure their families are financially secure without undergoing a medical exam might find this rider appealing.6. Sports Enthusiasts
Those who participate in recreational activities with higher risks, like skiing, rock climbing, or motorcycling, might find this rider beneficial.7. Business Owners
If you own a business, an accidental death benefit rider can provide additional funds to help keep the business running smoothly in your absence.8. People Without Traditional Life Insurance
For those who may not qualify for traditional life insurance due to health reasons, an accidental death benefit rider can still offer some level of financial protection.Factors to Consider when Buying Accidental Death Benefit Rider in Term Insurance
1. Coverage Amount
First and foremost is the coverage amount. Check if the coverage amount is aligned with your requirements. Check the risks you are trying to cover and the highest medical costs that might arise if you have an accident.
Thus, the coverage amount should be sufficient to meet the financial needs of your family in case of your unfortunate demise due to an accident. Also, consider factors such as your income, debts, and other financial obligations while selecting the coverage amount.
2. Premium
The premium amount for the accidental death benefit rider should be affordable, aligned with your requirements and must not put a strain on your finances.
Compare the premium rates offered by different insurers for your required sum assured and choose the one that provides the best value for money.
3. Exclusions
The list of exclusions is another must-check factor before buying the accidental death benefit rider or any insurance.
Carefully read the terms and conditions of the rider and understand the exclusions. See if your requirements align with the rider's terms and conditions.
4. Coverage
Understand the definition of accident as per the insurer so that you are entirely aware of the cases when you will receive benefits. You must be aware of the coverage that your rider provides, and all cases that it covers. Check if the same is aligned with your lifestyle and requirements.5. Claim Process
The claim process should be simple and hassle-free so that your family does not have to run from pillar to pole to get their claim settled when they are already dealing with emotional turmoil.
Look for an insurer with a good track record in settling claims quickly, efficiently, and hassle-free.
Eligibility Criteria for Buying Accidental Death Benefit Rider in Term Insurance
Like all other insurance policies and riders, there are certain eligibility requirements to buy an accidental death benefit rider:
Documents Required for Buying Term Insurance with Accidental Death Benefit Rider
Here is the list of common documents required to purchase a term insurance with accidental death benefit rider:
Step to Purchase Accidental Death Benefit Rider to Term Insurance
Step 1
Check if your existing term insurance policy allows for the addition of riders.
Step 2
Reach out to your insurance provider to express your interest in adding the rider.
Step 3
Complete any necessary forms provided by your insurer.
Step 4
Submit any additional documents that may be required, such as proof of identity and medical reports.
Step 5
Riders usually come with an extra cost, so be prepared to pay an additional premium.
Step 6
Once approved, you will receive confirmation from your insurer that the rider has been added to your policy.
Documents Required for Claiming Term insurance with Accidental Death Benefit Rider
Here is the list of most common documents required to claim a term insurance with accidental death benefit rider:
Note: Depending on the insurer's requirements, each section requires one or two documents as proof of an accidental death.
What are the Pros and Cons of Accidental Death Benefit Rider in Term Insurance?
Pros of Accidental Death Benefit Rider in Term Insurance:
- Financial Security for Loved Ones: It offers extra financial protection for your beneficiaries, which can be especially helpful if the insured is the primary breadwinner.
- Affordable: Compared to standalone accidental death policies, it is inexpensive and simple to add to your life insurance policy, giving you extra coverage for a small additional cost.
- Easy to Add: Often, you can add this rider to your existing life insurance policy without needing a medical exam.
- Supplement to Health Insurance: Offers an extra lump sum to your family after an accident, which can cover other costs or act as a financial cushion.
- Double or Triple Indemnity: Some policies offer double or triple the payout if the death is due to an accident.
Cons of Accidental Death Benefit Rider in Term Insurance:
- Non-Accidental Death Payouts: This doesn’t provide extra money if you die from natural causes or illness.
- Limited Coverage: Only pays out if the death is due to an accident, not natural causes or illnesses.
- Exclusions: Many policies exclude certain types of accidents, such as those occurring during dangerous activities or under the influence of drugs or alcohol.
- Occupation Restrictions: Some insurers may not offer this rider if you work in a high-risk occupation.
Tax Benefits of Term Insurnace with Accidental Death Benefit Riders in India
Tax Exemption on Premiums
Premiums paid towards the Accidental Death Benefit rider qualify for tax exemptions under Section 80D of the Income Tax Act, 1961. This means you can deduct the amount paid for this rider from your taxable income, reducing your overall tax liability.Tax-Free Payouts
The payout received from an Accidental Death Benefit rider is generally not considered taxable income under Section 10(10D) of Income Tax Act. This means that if the benefit is paid out due to an unfortunate accident, the amount received by the beneficiaries is usually exempt from income tax.FAQs about Accidental Death Benefit Rider in Term Insurance
Can you provide an example of how an accidental death benefit rider works in term insurance?
What advantages does accidental death insurance offer in term insurance?
Accidental death benefit in term insurance offers several advantages, including affordable premiums, additional financial protection in case of an unexpected accident, and peace of mind for individuals who engage in risky activities.
It ensures that beneficiaries receive extra financial support to cover expenses like medical bills, mortgages, or education, alleviating financial burdens during a difficult time. It’s particularly useful for those with high-risk jobs.
What is an accidental income benefit rider in term insurance?
Is the coverage amount of an accidental death benefit rider in term insurance taxable?
What is the difference between accidental death benefit rider and basic term insurance plan?
Basic term insurance provides financial protection to your family in case of your death, whether due to natural causes or accidental.
Accidental death benefit, on the other hand, provides additional financial protection in case of your accidental death.
How much does an accidental death benefit rider cost in term insurance?
Can I claim from two accident insurance policies?
Is there an age limit for buying the accidental death benefit rider in term insurance?
How much does an ADB Rider cost in term insurance?
Is an term insurance with accidental death benefit rider a good fit for me?
What does an accidental death benefit rider cover in term insurance?
What is the limit of accidental death benefit rider in term insurance?
Should we take an accidental rider with term insurance?
Can an accidental death rider increase the death benefit in term insurance?
What is the difference between death benefit and accidental death benefit in term insurance?
What is the claim period for an accidental death benefit rider in term insurance?
What is considered accidental death for insurance purposes in term insurance?
Is there any government benefit for accidental death in term insurance?
Who is the beneficiary for accidental death benefit in term insurance?
What are the exclusions of an accidental death benefit rider in term insurance?
Is purchasing an accidental death benefit rider a worthwhile investment in term insurance?
What are the key reasons to consider investing in an accidental death benefit plan in term insurance?
Key reasons to invest in an accidental death benefit plan include added financial protection in case of an unexpected accident, affordability compared to other coverage options, and peace of mind for individuals with high-risk jobs or activities.
This plan ensures that beneficiaries receive a larger payout to cover financial obligations, such as debts, education, or family support, if an accidental death occurs.
Is there a difference between Accidental Death Benefit (ADB) and Accidental Death and Dismemberment Insurance (AD&D) in term insurance?
How frequently can one claim insurance under term insurnace with accidental death rider?
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Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
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