Should you add a disability rider to term insurance? Here’s what you need to know

In an ever changing landscape of financial planning in the country, term insurance has become a cornerstone for several seeking to secure their family’s future financial security and prosperity. Now given that the primary function of term insurance is to provide death benefits to the deceased's family members.

Some of the prominent term life insurance plans that can be considered by applicants are, Max Life Smart Secure Plus Plan, HDFC Life Click 2 Protect Super, PNB MetLife Mera Term Plan Plus among others.

Still, the inclusion of riders, particularly the disability related rider can go a long way to ensure that the term insurance policies protective scope is enhanced immensely. This can in-turn help in efficient financial planning. This write-up is dedicated towards discussing the same idea in detail.

What is the meaning and concept of a disability rider?

A disability rider is an add-on benefit to a term insurance policy. It offers financial support if the policyholder becomes permanently disabled or movement restricted due to an unfortunate accident. Now this particular rider ensures that in the unfortunate event of such a disability the insured individual is provided with a pre-determined and pre-decided benefit.

This benefit can be structured and given to the insured individual either as a regular income or as a one time lump sum. This decision depends on the policy document terms and conditions.

For example: HDFC Life’s income benefit on accident disability rider provides the sufferer a monthly income equal to 1% of the rider sum assured for a fixed period of 10 years, especially in the case where the insured individual suffers a total permanent disability due to an accident.

Note: The rider discussed above is only for illustrative purposes. For the correct terms, conditions and updates please refer to the official website of your concerned term life insurance provider.

What are the benefits of adding a disability rider?

1. Replacement of income: Now in the unfortunate event of a decisive permanent disability, this rider acts as a protective, income replacement tool. It helps the policy holder and their family to sustain their standard of living and also helps the individual to fight back in life.
2. Coverage becomes comprehensive: Now the base term insurance generally covers death only. Whereas, this rider extends the coverage to ensure that different scenarios where the policy holder survives but is unable to earn or live a normal life due to disability is also covered.
3. Policy becomes more affordable and cost effective: Now, adding a disability rider is several times more cost efficient and effective for the policy holder instead of purchasing a separate disability insurance policy.
4. Associated tax benefits: The premiums submitted towards the disability rider may even qualify for tax deductions under Section 80D of the Income Tax Act 1961. Still, in this particular case it is important for the policy holder to clearly discuss the pros, cons, tax implications of the policy with the company agent or some externally sourced out tax professional for the most accurate picture.

What are some considerations before applying and opting for a disability rider?

• Criteria of eligibility: Most of the prominent insurers have clear and specific eligibility criteria. They include age limits, health requirements, past health history, related disability etc., all of such points are taken into consideration for adding a disability rider to a term insurance policy. That is why it is crucial for aspirational policy applicants and current holders to discuss the terms and conditions of eligibility clearly with their insurer to get a clear picture on the same.
• Exact terms on the definition of disability: Now, this is a very important point. You need to clearly understand how your insurer defines ‘total and permanent disability’ along with the conditions under which the rider benefits are payable to the insured individual. This is important because if you are clear about the exact wordings and the terms of the policies only then you can contest any rejection if raised by your insurer during claim processing. Most insurers keep these terms complicated and open for litigation. That is why you on your end should discuss things clearly with a qualified professional in law before going ahead with the rider in your term insurance policy document.
• Keep a close eye on exclusions: You need to be also aware of any exclusions in your term insurance policy and its associated riders. Some common exclusions are: self induced injuries or injuries suffered due to the participation in hazardous activities. All such issues might not be covered by your rider. You need to be aware of these from the inside out so that you can avoid any surprises or rejections in claim settlement later on.

Conclusion

Therefore, adding a disability rider in your term insurance plan is a sensible step. It helps the insurer towards comprehensive health and financial protection in case of any unfortunate event that takes place in the insured person's life.

It helps in defending the individual sufferer and his family against unforeseen and difficult circumstances due to permanent disability. Still, as with all decisions in life, it is prudent to consult a certified financial advisor to help you tailor the policy according to your financial capacity and long term life goals.

Disclaimer: The information provided in this article is for general awareness purposes only and should not be considered financial or legal advice. Please consult with a certified financial advisor or insurance expert before making any policy decisions.