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Is it worth buying a Permanent Disability Rider?

10 Oct 22      |       | ShareShare Share Blog Or copy link Copy Share this link via

Authored by: Anurag Ainapurapu
Reviewed by: Krupa Kenia

The Long Read


Everything you *need to know* is right above this. Scroll down, only if you'd still like to read more (honestly, why?)

If you meet with an accident that leaves you permanently disabled, your family will struggle financially, especially if you are the sole breadwinner. Besides their regular expenses, there is now the additional expense of your treatment and caregiving.

Even if you have a term plan, they can't get the insurance amount unless you pass away during the policy duration.

How do you replace the income that you can’t earn anymore? In this scenario, your family will need all the financial help they can get.

 

The solution is simple -> Permanent Disability Rider. It is an add-on benefit you can choose along with your term plan that pays you a pre-decided lumpsum amount right away, in the event of your permanent disability.

A permanent disability can result in a financial crisis for your family. You should opt for this rider if you want to protect your loved ones from: 
 

  • The financial shock of income loss due to disability

  • The extra costs arising due to disability
     

Let's understand with an example:

Say, you have purchased a term insurance policy with a life cover of ₹ 1 crore and a Permanent Disability rider of ₹ 50 lakhs.
 

If you are disabled in an accident, you will get ₹ 50 lakhs right away. If you pass away, your family will get ₹ 1 crore.
 

Pro tip: If you decide to buy the Permanent Disability and Critical Illness Riders, and your insurer waives off all future premiums under these riders, you can skip the Waiver of Premium Rider.

While the actual cost will vary from insurer to insurer, the Permanent Disability Rider is relatively expensive compared to other riders. If you are considering opting for this rider, you should check the cost information with your insurer or an insurance advisor right away.

Your insurer will give you the option of choosing this rider when buying a term insurance plan.

Or you can even buy it on your policy anniversary.

The exact process of course, will vary from insurer to insurer, so we suggest you speak to your insurer of choice or an insurance advisor to know more about this.

Yes. The Permanent Disability Rider is what we call an Additional Rider which pays an additional amount over and above the term plan life cover amount. 
 

Let’s say your term policy offers a life cover of ₹ 1 crore and you have a permanent disability rider of ₹ 10 lakhs. If you get permanently disabled, you’ll receive ₹ 10 lakhs. If you pass away after getting disabled, your family will receive ₹ 1 crore.

Yes, you can always buy this rider after buying the term policy but only on the date of your policy anniversary. 
 

But know this, it’s advisable to buy term plan riders along with the plan itself because insurers may not offer you certain riders later on. For example, if you try to buy a critical illness rider a few years after getting your term plan, you may not get the rider then if you had developed any critical illness after buying the term plan. 

Find out more about buying term plan riders after buying the plan. 

With the Permanent Disability Rider, you can also get up to ₹ 1.5 Lakh tax benefits* for the premiums towards the term plan, provided the premium does not exceed 10% of the basic life cover, under section 80C of the Income Tax Act.

*Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions and tax Laws are subject to change from time to time. You are requested to seek tax advice from Chartered Accountant or personal tax advisor with respect to personal tax liabilities under the Income-Tax law

It’s very important to note the exclusions under this rider i.e. cases for which you won’t receive the rider benefits, such as:   
 

  • Suicide
  • Self-inflicted Injuries
  • Alcohol abuse or drug overdose
  • Disability that occurs after 180 days from the accident
  • Participation in riots, war, civil commotion, rebellions or other dangerous activities 

 

The exclusions will vary from insurer to insurer.  Speak to your insurer to check the complete list of rider exclusions.

Unfortunately, no. If you’re already disabled, you won’t be able to add a permanent disability rider to your term policy. 

At the time of buying a term plan, it’s important to reveal your health history, which includes information about your disability (if any). So, yes, you do have to inform your insurer about the disability caused by an accident. Not doing so may lead to a claim rejection later on.
 

If you already have bought a term plan, it is not mandatory for you to inform your insurer if you’re disabled in an accident. But we still advise you to do so. Why? If you have the permanent disability rider to your term plan, informing your insurer will allow them to provide you with the benefits that the rider offers. 

If you’re buying a term policy, then yes, it would be good to inform your insurer about this. This information will help your insurer to see if there are any riders that can cover you for the risks that your new job/hobby may have. For example, the accidental death benefit rider will provide an additional payout to your loved ones if you pass away in an accident caused by your new job/hobby. The permanent disability rider will give a predetermined amount to help replace your income if you’re disabled by your new job/hobby. 
 

If you’re taking up the new job/hobby after you buy a term policy, it may not be required to tell your insurer about the same. However, it’s best to check this with your insurer. 

Not only the permanent disability rider benefits but you’ll also lose your term plan benefits if you don’t pay your premiums on time. When you don’t pay your premiums on time, your policy will lapse and you’ll have to revive the policy to continue enjoying its benefits as well as the various rider benefits. 
 

Find out more about what happens if you don’t pay your term plan premiums on time. 

See, the cover amount mentioned by the permanent disability rider will be given to you directly when the insurer gets to know that you’ve been disabled. For e.g. if you’re buying a permanent disability rider of ₹ 20 lakhs along with your term policy of ₹ 1 crore, you’ll get the ₹ 20 lakhs if you’re disabled while your term plan’s life cover still remains intact. If you pass away later on during the policy period, your family will then receive the ₹ 1 crore. 

You’ll have to check with your insurer on this. Some insurers may waive off your future premiums if you get disabled during the policy period. If your insurer allows such a thing then you can consider skipping the waiver of premium rider. 

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