Insurance
•02 min read
Welcome to our brand-new series, A-Zs of Insurance. In this series, we will venture into the world of insurance to breakdown insurance jargon for you, so you’re empowered to make informed decisions about your financial security.
Did you know that approximately 4.6 lakh road accidents took place in India in 2022 [Source: Ministry of Road Transport and Highways]?
Did you know that accidental falls are the second leading cause of death across of the world [Source: WHO]?
This data might seem alarming. So, it’s best to take precautions against potential accidents. Practising safe driving skills, creating safer work environments, encouraging safety training sessions are all helpful in preventing accidents.
However, life is not always predictable, and try as one might, it’s not always possible to control circumstances. In the face of unpredictable circumstances that may cause harm, insurance is a true friend.
And while many of us try to avoid thinking about the morbid details of insurance policies, an accidental death benefit rider is exactly what’s needed to financially protect family members from accidents that may cause one harm.
An accidental death benefit rider is an add-on cover that one can get with a base life insurance plan. It widens one’s plan benefits, by covering accidental deaths and ensures that the beneficiaries receive a payout in case the insured passes away due to an accident.
Some plans may also come with a minimum tenure for the rider (i.e. the minimum time span it needs to be bought for), like say, 5 years.
It covers various fatalities like -
a. Road accidents
b. Airplane crashes
c. Fire-related injuries
d. Accidental falls
e. Accidents due to weapons, etc.
The rider can be bought along with a life insurance policy, at an extra cost. No additional formalities or documents are needed.
If this rider is bought with a life insurance policy, it gives the beneficiaries dual payouts; one from the base policy and one from the rider.
A person buys a term insurance plan with a coverage of Rs 50 lakhs and an accidental death benefit rider with a coverage of Rs 10 lakhs. Let's imagine the person passes away due to a road accident. Their beneficiaries will get a payout of Rs 60 lakhs: Rs 50 lakhs from the term insurance plan and Rs 10 lakhs from the rider.
Term insurance base cover purchased INR 50L
Accidental Death Benefit rider purchased INR 10L
Total payout in case insured passes away due to an accident INR 60L
In essence, while one’s basic life insurance covers them in the case of death, the accidental cover provides additional protection by giving their family an extra payout, determined by the terms of the add-on.
The amount of cover one needs is dependent on personal preferences and family’s needs. The accidental death benefit rider cover amount is usually a fraction of the insured’s entire life insurance cover. The amount can be decided based on the family’s financial requirements in their absence.
The Accidental Death Benefit Rider is valid for the full term of one’s life insurance policy. For example, if the policy is valid till the age of 80, the rider will also be valid till that time.
