Term insurance plans are the purest form of life coverage, where the insurer pays out a lump sum amount to the nominees of policyholders in case of their unfortunate demise within the policy period or after the maturity of the policy. At the same time, you can enhance your coverage substantially by choosing riders. 

These are add-ons that offer specific features and coverage benefits to policyholders. Some of the riders include accidental death benefits, critical illness, waiver of premium, and many more. In this article, we will look at the accidental death benefit rider and understand whether you should add it to your term plan. 

Accidental Death Benefit Rider- What does it mean? 

The accidental death benefit rider ensures an extra sum assured amount for the nominee/family members of the policyholder in case of an unfortunate death owing to an accident. The percentage of this additional sum is calculated based on the sum assured of the original term plan and varies across insurers. 

Some policies have a cap on the maximum sum assured on this rider. Hence you must be aware of the terms and conditions of the accidental death benefit rider. However, the premiums for an accidental death cover in your term insurance plan remain constant throughout the policy tenure.

There’s a common misconception regarding the accidental death benefit rider that the sum assured is applicable only if the policyholder passes away due to an accident. But in reality, the beneficiary is still eligible for the primary term plan benefits, i.e., if the policyholder passes away owing to some other reason, the beneficiary will still receive the basic sum assured. Apart from road accidents, the accidental death benefit rider also covers incidents like plane crashes and industrial accidents.

An example will help you understand things better. Suppose you have a term insurance plan of Rs. 1 crore and buy an extra accidental death benefit rider of Rs. 20 lakh. In the event of your demise due to an accident, your nominee will get Rs. 1.2 crore (Rs. 1 crore + Rs. 20 lakh). If your cause of death is not an accident, then the nominee will get the basic sum assured, i.e., Rs. 1 crore.

If you’re still sceptical about whether you should buy an accidental death benefit rider, here are some reasons to help you make a sound decision.

Why an accidental death benefit rider is helpful 

Here are some reasons why you should get an accidental death benefit rider and who should definitely opt for it: 

  • Those working in a hazardous environment should get this rider. 
  • Those passionate about regular adventure and athletic activities should also choose the rider. 
  • Accidental death benefit covers the policyholder’s demise, ensuring a lump sum payout that helps family members partially offset the loss of income and clear pending medical bills if applicable. 
  • The premium paid for the rider will qualify for tax deductions under Section 80C, subject to the overall limit for the section. 
  • The rider benefit is paid in regular instalments or as a lump sum, depending on the family’s requirements. Flexibility is one of the main advantages of choosing these riders. 
  • Accidental death benefit riders do not require medical examinations from policyholders. 
  • They also entail minimal and hassle-free documentation compared to regular life insurance policies. 

While accidental death benefit riders have numerous advantages for policyholders and their families, what exactly qualifies as an accidental death? Let’s understand. 

What do we mean by accidental death? 

Accidental death is any demise arising from situations that are not under the control of the insured person. These usually include the following: 

  • Death from car crashes and vehicle accidents. 
  • Death due to drowning or choking. 
  • Death arising from machinery and equipment. 
  • Death from any other situation not in the person’s control and recognized as accidental. 

However, these policies do not offer coverage for specific kinds of accidental deaths. In most cases, these include deaths due to hazardous pursuits, war, self-inflicted hazards, suicide, alcohol or drug abuse, participating in civil unrest, riots, rebellion, illegal activities, etc. There are also age limits to be taken into account. The minimum and maximum entry ages are usually 18 and 65 years, respectively. Many policies also exclude deaths after 180 days of an accident. 

Conclusion

Considering the growing instances of mishaps throughout the world, it does make sense for policyholders. This rider will ensure an additional payout for your family members in a distressing scenario, giving them an extra protection layer over the regular term insurance policy. 

You can use a term insurance plan calculator to calculate the premium payable for your term plan with the additional rider. Choosing this rider is also necessary if you work in a risky environment or have potentially dangerous hobbies and lifestyle pursuits.