InvestorQ : Do life insurance policies cover only death of the policyholder or accidents and illnesses as well?
nishi Shah made post

Do life insurance policies cover only death of the policyholder or accidents and illnesses as well?

Answer
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Rishita Das answered.
2 years ago


The way life insurance products are structured, they are primarily meant to provide financial help to a policyholder’s family in case of the policyholder’s death.

Most policies, however, do offer additional coverage for disability, accident and various illnesses. However, these are not pure protection plans and are called riders. In the insurance business, riders help policyholders create insurance products that meet their specific needs, which may or may not be same for any other policyholder.

Riders usually come at an additional cost although some policies do offer them as part of the primary plan.

A few important riders that policyholders can opt for in India are:

1. Critical illness: This is among the most important riders provided by insurance companies. As life is uncertain and we are prone to contracting medical conditions from time to time, a critical illness rider is an excellent option to help reduce unnecessary expenses. You should know that life insurance policies do not usually cover medical and hospitalisation expenses, which means that if you fall sick despite holding a life insurance policy, you will have to bear all the costs related to your treatment all by yourself. A critical illness rider can prove to be very beneficial as it doesn’t only ensure that you enjoy some financial support when it comes to paying your medical bills, but also provides access to quality medical attention. This helps to ensure that treatments are not ignored or delayed owing to lack of finances.

2. Partial and permanent disability: Life is uncertain, and any incident or accident has the potential to render an individual disabled. In case of disability, the individual is impaired to the extent that one cannot even work and earn the income that he/she requires to support his/her family. This results in an upheaval in the lifestyles of the individual as well as the family members dependent on him/her. In such a case, the individual will require an alternate source of income to ensure the healthy functioning of his /her family. A partial and permanent disability rider is the best bet in such cases as it provides staggered payments to the individual if he/she meets with an accident due to which they are disabled and unable to work. These payments are generally a certain percentage of the total sum assured (10% or more in most cases) and ensure that you can meet your financial requirements even if you are partially or permanently disabled.

3. Accidental death: This rider is an ideal option for those who intend on ensuring that their families have adequate financial resources if they meet an untimely and accidental death. In addition to considerably high medical costs, the number of unfulfilled financial liabilities are also usually high in case of an individual’s accidental death. This adds to the grief the family is already undergoing.

This accidental death rider comes in very handy in the situation described above as it will ensure that the individual’s family will receive an additional payment in case the policyholder dies from an accident. Although the basic sum assured will be paid out to the nominees upon the death of a policyholder, the rider provides the family with extra funds to ensure that they can manage all their expenses, thereby making it slightly less stressful to deal with the loss of a loved one.

4. Premium waiver: If a policyholder fails to make a premium payment on time, he/she will receive a notification from the company to ensure that all due premiums have been paid within a predetermined grace period. Failure to make premium payments within the stipulated time period often results in a situation wherein the policy is considered lapsed. As a result, the policy will no longer be active and the policyholder will not be eligible for the benefits upon the policy’s maturity. Though reasons for not paying the premium can be many, fact is that the policy will be considered useless. However, it is in such cases that this rider comes to use. Even if the policyholder can’t make premium payments for a certain period of time, be it because of disability or unemployment, this rider will ensure that his/her policy doesn’t lapse. The rider will allow your premium payments to be waived off but the policy will continue as per the initial agreement.

5. Income benefit rider: The demise of a sole-earning member of any family can be a devastating loss and make it hard for the dependents to carry on with their lives in the same manner as before. If the policyholder is the sole breadwinner of the family then it is essential to ensure that the family gets a regular source of income in case, post the policyholder’s death. The income benefit rider is perfect for individuals who wish to ensure that their family’s lifestyle remains unaffected in case of their untimely death. As the name suggests, the income benefit rider provides regular income to the family of a deceased policyholder, and the amount payable to the nominees through such a rider is usually a percentage of the total sum assured. By purchasing this rider, a policyholder ensure that his/her family will be financially secure and have relatively lesser financial concerns to deal with in case of the policyholder’s death. your untimely death.