Certain unfortunate happenings such as accidents can turn your entire world upside-down within a few moments. Such mishaps are indeed hard to accept. The worst part is that nobody can predict them and they are unavoidable.
It’s way better to ensure safety and security for yourself and for those who are dear to you. An insurance policy promising financial protection against accidents and mishaps resulting from them sounds promising. Doesn’t it?
This is where a personal accident policy will come to your rescue. However, a personal accident policy isn’t the only protective shield that you can avail of. Term insurance schemes often come with an additional benefit known as the accidental death and disability rider. You can opt for any of these two. But prior to making any decision in this regard, you should always learn about these schemes and how you might benefit from them.
What Is Personal Accident Policy?
A personal accident policy will prove to be your truest friend if someday you end up in a hospital bed because of an accident.
Consider an example. One day, Akshay was on their way back home after a pretty long day at work but a truck rammed into his car and he had to be hospitalised. His skull was fractured and they had to undergo an immediate surgery. The hospital bills were nothing less than exorbitant and amounted to INR 30 lakhs.
Luckily, he had a personal accident policy with a cover of INR 50 lakhs for a term of 2 years. His family thus, didn’t have to worry about the costs of their operation and the subsequent treatment.
| Age (years) | Insurance | Sum Assured (INR) | Annual Premium | Medical Expenses due to Accident (INR) |
|---|---|---|---|---|
| 30 | Personal accident insurance | 50 lakhs | INR 13,000 | 30 lakhs |
In simple terms, a personal accident policy enables you to pay out your hospital bills in case you meet with an accident. Besides, it provides a compensatory amount to your family if the accident results in your demise. But what if you survive but are left with a disability which results in a loss of income? There is no need to worry because your personal accident policy will be your saviour under such circumstances as well.
But, if the policyholder passes away under natural circumstances, the money paid as premiums will not be of any benefit. The policy will prove to be helpful only when the policyholder is grievously injured by an accident, like car crashes, burns, snake bites and so on. There are several other exclusions as well. A personal accident policy will not be of any use if:
- The policyholder attempted suicide
- They sustained injuries because of their involvement in criminal offences
- They were left seriously wounded by wars or other military activity
- They hurt themselves under the influence of drugs, alcohol or other intoxicants
- They participated in adventure sports and got injured as a result of that
- They passed away while giving birth, etc.
Benefits
A personal accident policy offers a host of benefits. You can avail of the following benefits in case you invest in a personal accident policy:
1. The financial security of your family will be taken care of even if you lose your source of income owing to your disability. Some companies offer security against dismemberment caused due to accidents. You and your family would be eligible to avail of the benefits under the following circumstances as well:
- Permanent total disability, for instance, loss of both arms or both legs, complete blindness, etc.
- Permanent partial disability, for e.g.: loss of one hand or one leg, loss of sight in one eye, etc.
- Temporary total disability
2. Your nominee(s) will receive 100% of the sum assured in the event of your demise. In case you are left with a permanent disability, you and your family will receive 100% of the sum assured. But if your disability is temporary, you will receive weekly benefits.
3. A personal accident policy offers additional benefits. It will take care of your children’s education, provide for transportation expenses, ambulance costs, unemployment cover, funeral expenses, etc.
4. There is no need to undergo medical check-ups to buy this policy.
5. You can enjoy worldwide coverage.
6. The claim process involves no hassles.
Who should buy a personal accident policy?
Accidents happen without any prior warning. Considering this fact, anyone can choose to buy a personal accident policy if they are above the age of 18. But, people involved in high-risk professions such as builders, contractors, journalists and so on should consider buying this policy.
What is Accidental Death and Disability Rider under a Term Plan?
Let’s consider an alternative possibility where Akshay (from the above example) had a term plan along with an accidental death and disability rider. In this case, let’s assume the base term plan would offer a coverage of INR 1 crore for a period of 40 years. Now, they had opted for an accidental death and disability rider with a cover of INR 20 lakhs. So, if they end up with a disability or pass away, the sum assured in the rider along with the amount assured in the base plan will come to the rescue of their nominee(s).
| Insurance | Cover | Term (years) | Additional Cover with ADDB Rider | Premium |
|---|---|---|---|---|
| Term plan | INR 1 crore | 40 years | INR 20 lakhs | 13,626 |
Term insurance plans often come with additional benefits. For those who might be unaware, a term insurance plan ensures financial security to your family in the event of your untimely demise. You can avail of these extra benefits, if you are willing to pay some extra money as premium. Such benefits are known as riders. Accidental death and disability benefit rider is one among these riders.
An accidental death and disability benefit rider ensures financial protection for you and your loved ones if someday you pass away due to an accident. The sum assured by the base plan as well as the sum assured by the rider will be paid out to your family in case you pass away. So, this rider acts as a double indemnity rider.
The benefits of this rider can be reaped in case of permanent or temporary disabilities resulting from accidents. If a policyholder’s ability to pay premiums in future gets affected due to accidental occurrences, their premiums might even be waived off. However, this clause varies from insurer to insurer. The exclusions for this rider are the same as in case of a personal accident policy.
The following are the exclusions under this rider:
- The policyholder attempted suicide
- They sustained injuries because of their involvement in criminal offences
- They were left seriously wounded by wars or other military activity
- They hurt themselves under the influence of drugs, alcohol or other intoxicants
- They participated in adventure sports and got injured as a result of that
- They passed away while giving birth, etc.
- Pre-existing disability or injury is also excluded
Who should buy a term plan with an accidental death and disability rider?
A term plan along with an accidental death benefit rider is the right choice for you if you choose to provide your beneficiaries with additional protection. Term plans promise financial protection to your family in the case of your unfortunate demise. So, anybody wanting to offer dual protection to their family may opt for this plan. Apart from them, people working under hazardous conditions may consider choosing this plan instead of a standalone policy.
Difference Between Personal Accident Policy and Accidental Death and Disability Rider
The differences between a personal accident policy and an accidental death benefit rider are tabulated below:
| Personal Accident Policy | Accidental Death and Disability Rider |
|---|---|
| This policy is a standalone policy offering financial security to the policyholder and their family if they pass away or are rendered temporarily or permanently disabled owing to an accident. | This is an additional benefit which comes along with a term plan. In case the policyholder passes away or loses their source of income owing to disability caused by an accident, their nominee(s) will receive all the benefits. |
| The premium amount payable is quite low. | To avail of the benefits provided by the rider, an additional amount of premium needs to be paid apart from the premium paid for the base term plan. |
| This policy comes with a lot of perks, such as transportation expenses, monetary benefits for children’s education, ambulance costs, funeral costs, etc. | This rider does not cover educational expenses or any other educational expenses. |
| Natural causes of death are not covered. | The rider comes with a base term plan. The base plan will offer monetary benefits to the beneficiaries even when the policyholder dies of natural causes. |
| These policies are not eligible for tax deduction under Section 80C. | The base term plan offers some tax benefits. |
| The coverage provided is pretty high. | The coverage provided by the rider is not very high. |
Key Takeaways
You must always carefully consider your own financial requirements and that of your beneficiaries before you buy a policy. Your financial situation and the affordability of a plan must also be taken into account. Besides, the benefits provided by each plan and the coverage amount as mentioned in the agreement papers must be carefully reviewed. If you want a comprehensive coverage for your family in the event of an unforeseen accident, you must opt for a personal accident policy. But, a term plan with an accidental death and disability rider will offer dual protection to your nominee(s). So, choose wisely once you have carefully weighed all the pros and cons that come with each of the plans.
