In developed economies individuals tend to be more self-reliant by adopting various financial tools so that they live their life with dignity and comfort. If, unfortunately, their life span is cut short by unforeseen events, their dependents, too, live with the same degree of dignity and comfort in terms of income and spending capabilities.
Life insurance has been a very scientific and enduring tool for providing certainty in a world ruled by uncertainties all around. In his autobiography, Mahatma Gandhi has quoted an American life insurance agent in South Africa as saying, “We, in America, regard it as a religious obligation to get insured.” Gandhiji signed up for a policy even though he experienced tremendous conflicts between insurance and his faith in God.
A very recent research report has revealed that in India, only road accidents have claimed 1,50,000 lives in 2015, a very disturbing figure indeed. Similarly, data regarding railway accidents are equally frightening. The Mumbai suburban railway witnesses more than a thousand accidents a year. Accidents leave behind several lakhs of traumatised young and old, as well as huge unfinished agendas.
The life insurance providers offer a unique additional benefit through the accident benefit rider. Rider stands for an add-on benefit which a policyholder can obtain along with the proposed endowment, term, whole life or any other similar policy on both unit-linked insurance policy (Ulip) and non-Ulip platforms. This benefit is offered at a very negligible cost as the original premium for the insurance policy takes care of most of the management expenses.
Most insurers in India charge Rs 1 or less per Rs 1000 of the sum assured. Under the accident benefit rider the additional sum assured is always equal to the basic sum assured, subject to a maximum ceiling per individual .The ceiling is generally Rs 50 lakh. To opt for the rider, a simple option is to be exercised while signing the original proposal papers.
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If a policyholder with life insurance cover of Rs 10 lakh dies of accident as confirmed in a police or hospital report, the nominee will be entitled to basic sum assured of Rs 10 lakh and also to an additional sum of Rs 10 lakh as accident benefit. Under the with profit endowment type policies, accrued bonus is also payable.
Under this rider the insurers also extend full or partial benefit to those who do not die following an accident but suffer permanent or partial disability hampering his ability to earn for self and family. Generally the disability benefits are payable over a certain period of time to help the victim as well as the family members emerge from trauma as well as financial loss and dislocation.
For the purpose of accident cover, the insurers define the incident as having taken place due to some external, visible and violent means. Death after prolonged treatment following accident may not trigger payment of the additional accident benefit sum if the immediate cause of death cannot be attributed to the accident. Sometimes some disputes are reported to the Ombudsman or the courts in this context.
The problem with accident is that it generally snaps a life in its prime time. Youngsters often tend to be adventurous, chivalrous or act rashly sometimes to prove to friends or even to themselves their competence in driving, swimming, climbing or managing their way into or off the train, to quote a few episodes. They ignore ‘Better late than never’ and invite tragedy for the loved ones.
The other truth about accident is that it is not necessarily due to one’s own doing. Anybody else’s mistake or a freak accident can take away precious lives any moment. Hence, ask for the accident benefit rider before you sign a proposal for life insurance. You may not get another chance.
The writer is former MD & CEO, SUD Life, an Indo-Japanese JV