Does a Term Life Insurance Cover Disability

Written by : Knowledge Centre Team

2021-11-17

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Term insurance is a life insurance product whose purpose is to provide life coverage to you for a specific period of time or ‘term’. If you have bought a term plan and you die within the term of the policy, then the sum assured is provided to your family. This helps in maintaining the financial security of your family even if you are not there.

Now we know how the term life insurance plan takes care of your family in case of your death. But death is not the only thing that you would fear. There are other risks as well. Your earning can stop even if you have not died. How? Suppose you suffered a massive accident. Though you managed to survive, now you have a permanent disability.

What if you are earning well and are financially secure but suddenly you are diagnosed with cancer. All your savings will go towards the expensive medical care you have to go through. This will shatter all your plans in a matter of seconds.

Both the above examples highlight to you the risks of critical illnesses and disability. Before going further let’s take a look at what will constitute a disability.

What is Disability for Insurance Policies?

A disability happens when the worker is unable to perform his job due to some limit of functioning of a body part. The parameter of what can be called a disability varies with different insurance providers. But more or less, the following things are counted as a disability.

Loss of use of a hand or both hands
Loss of use of a leg/legs
Loss of vision- unable to see through your eyes (blindness)
Loss of hearing- inability to listen (loss greater than 90 decibels in both the ears)
Loss of speech- losing the ability to speak due to injury to the vocal cords

Also Read - Short term vs Long term Disability Insurance

Double Whammy of Disability?

What these disabilities do is they can limit you from doing your job and earn a living. This is a bigger concern when you are the only breadwinner for your family. This sudden loss of your income can hinder the financial stableness of your family.

“Loss of income + Additional cost of living”

Not only a disability can cause a loss of income, but it also increases expenses as well. To take care of disability many modifications in your home needs to be done and many medical treatments are also needed. These costs were huge. So, disability hits you as a ‘double whammy.

Keeping in mind the seriousness of disabilities and how it affects you and your family, term life insurance policies provide you with the option to cover disabilities.

How to Get a Disability Cover with a Term Insurance Plan?

Term plans have a feature that involves adding riders to your basic cover. There is a rider that covers you for disabilities. This is known as Accidental Death and permanent disability rider. These riders are available with:

Term life insurance plans
Health insurance plans
Other traditional life insurance plans
Child education plans

What are Riders in a Term Insurance Plan?

Riders are add-on covers that can be added to your existing cover. They enhance the scope of your life or health insurance plan. You may avail the following type of riders with your life and health insurance plans:

Critical illness rider
Child support benefit rider
Accidental death rider
Accidental Total and Permanent Disability

By selecting the Accidental Total and Permanent Disability rider at the time of purchasing your term plan, you can get disability cover.

Why Add Disability Rider to your Term Insurance Cover?

Term insurance cover is a pure protection plan. Thus, this is one plan which offers adequate financial protection at a pocket-friendly cost. Adding disability cover to a term insurance plan means you can add a large enough benefit amount without affecting the premium too much.

For example, you can add up to Rs 25 lakhs in disability benefits to your Rs 1 crore term insurance plan. However, this benefit cannot exceed the base life or health cover of the primary policy.

Thus, adding more than Rs 10 lakh cover to a Rs 10 lakh ULIP would not only be impossible, but you may have to opt for an even lower amount.

So, add disability cover to your term plan so that you get:

Adequate financial support in case of the event
Your cost of cover remains low

What is an Accidental Total Permanent Disability Rider?

Choosing this rider, entitles you to get an additional sum in case you suffer from a permanent disability due to an accident. The sum is separate from the life cover, it acts as an add-on to your existing sum assured.

The amount can be used in meeting the expenses associated with your disability. This will reduce the burden on your family members. This will ensure that you do not become a liability and can take care of the sum you received.

To avail of this rider, you need to pay an amount that is over and above the extra premium. This varies from policy to policy.

Note that you will receive the sum assured in the case of ATPD only when your disability is included in the insurance provider’s policy. Also, the rider has some criteria involved. If your disability falls outside of the following criteria, then you will not be entitled to receive the sum assured.

CRITERIA

The disabilities must be present for at least 6 continuous months.
The doctor or the specialist must confirm the disability that you suffer.

EXCLUSIONS INVOLVED IN ATPD

ATPD has some exclusions, if your disability arises out of these exclusions, no benefit will be payable. These are as follows

If there are signs of disability before or at the time of buying the term insurance.
If the disability arises out of things done purposely. That is, self-inflicted. For example, attempting suicide.
If the disability occurs when you are under the influence of alcohol or any other drugs which is not prescribed by the doctor for you.
If you take part in an activity that is illegal, for example taking part in fights, attempting theft.
If disability arises from any activity that you take on, which is dangerous. For example, mountaineering, skydiving.
The disability that occurred during/ due to war.

Features of a Disability Cover in a Term Plan

Now that we know what exactly a disability cover is and how can it help you, let us take a look at the features of a disability cover.

1. Financial Support

A disability cover must ensure that the basic sum assured that comes with the basic policy will still be receivable to your family in case you die within the period of the term. That is the benefit of the disability rider does not lead to cancellation of the death benefit.

Canara HSBC Life Insurance iSelect Smart360 Term Plan premium protection plus variant will not only provide you with the ATPD sum assured, but also makes sure that the policy continues and the death benefit is also intact.

2. Waiver of Premium

Plans like the iSelect Smart360 Term Plan offer a feature of premium waiver. If you have selected the variant premium protection or premium protection plus of the iSelect Smart360 Term Plan, then you can get the benefit of it. With this option, if you suffer from a disability due to an accident, then all the future premiums you have to pay will be waived off, that is you are not required to pay the remaining policy and it will remain active.

This reduces the financial stress that you or your family members can go through while paying premiums despite no income.

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