Should you go for accidental death insurance despite having term insurance? Check this before deciding

Many people assume that buying a term insurance policy means they are adequately protected against every risk. But insurers also offer an accidental death benefit rider that promises an additional payout if death occurs due to an accident. Does that mean you need both?

The answer depends on your existing life cover, occupation, lifestyle and financial responsibilities. An unfortunate death due to an accident is often followed by expensive treatments to save life, and may significantly erode your savings and assets meant to support the family. For many, term insurance cover may not be sufficient, and accidental insurance may offer the desired support.

Here's how accidental death insurance differs from a regular term insurance policy and when buying it may make financial sense.

Do you need accidental death insurance if you already have term insurance?

A standard term insurance policy pays the full sum assured irrespective of the cause of death, provided the policy is in force and the claim satisfies the policy conditions. This means your nominee receives the same payout whether death occurs due to an illness, natural causes or an accident.

Also read: Missed your term insurance premium? Here's what happens to your policy, claim, and life cover

On the other hand, an accidental death benefit rider works differently. It is an optional add-on that increases the payout only when death is caused by an accident.

“An accidental death benefit rider is not a substitute for a term insurance policy but an add-on that enhances your coverage,” says Madhu Burugupalli, Head, Product Management & Strategy, Bajaj Life Insurance.

For example, if a person holds a term plan with a base sum assured of Rs 50 lakh and has also opted for an accidental death benefit rider of Rs 25 lakh, the nominee will receive Rs 75 lakh in total if death occurs due to an accident during the policy term. If the same person passes away due to an illness, the base sum assured of Rs 50 lakh would be paid, since the rider benefit applies only in case of death due to an accident, he adds.

What does accidental death insurance cover?

Unlike term insurance, an accidental death rider applies only when death directly results from an accident. According to Sabyasachi Sarkar, MD & CEO, Go Digit Life Insurance, depending on the insurer, it may cover fatalities arising from:

• Road accidents
• Air or rail accidents
• Accidental falls
• Fire-related injuries
• Homicide

This extra financial cushion is particularly beneficial for individuals in high-risk jobs or those who travel frequently.

Most insurers also require death to occur within a specified period, typically 90 to 180 days from the accident, for the rider benefit to become payable, points out Sarita Joshi, Head of Life and Health Insurance at probus.

What is not covered under an accidental death benefit rider?

While an accidental death benefit rider provides crucial financial protection, policyholders must be aware that certain types of accidental deaths are strictly excluded from coverage.

Also read: Cashless health insurance claim rejected? You may still get your claim settled; here’s how

Claims are generally not payable if death results from:

• Suicide or self-harm
• Adventure sports or hazardous activities such as skydiving, mountaineering or motor racing
• Alcohol or drug intoxication
• Participation in criminal or illegal activities

“Additionally, death due to an exacerbation of a pre-existing medical condition is generally excluded even if the condition was to have been triggered by an accident,” says Joshi.

Some policies may exclude claims made after a certain number of days have passed following the accident, she adds. Since exclusions vary across insurers, reading the policy wording carefully is essential before opting for the rider.

Who should consider buying an accidental death rider?

An accidental death benefit rider is highly recommended for individuals whose occupations or lifestyles naturally expose them to higher daily risks.

“This includes people who travel frequently by road, rail, or air, those working in physically demanding environments such as construction or manufacturing,” says Burugupalli.

It may also be worth considering if you are the primary earning member of the family and want to leave behind a larger financial cushion in the event of an accidental death.

On the other hand, someone with limited exposure to such risks, or whose base term cover is already considered adequate for their family's financial needs, may not find this rider essential.

Individuals with low-risk, sedentary desk jobs, or those who rarely travel and already have a substantial base term sum assured, can look into other add-ons/riders to make their term policy more comprehensive, explains Sarkar.

Should you increase your term insurance cover or buy an accidental death rider?

There's no one-size-fits-all answer here; it really comes down to what you already have and what you can afford.

“If your base term cover is already in a healthy range, say 15-20 times your yearly income, then adding an accidental rider is a good, cost-effective way to add a cushion for accident-related risks specifically,” says Joshi.

However, if your existing life cover itself is inadequate, increasing the base sum assured should come first.

For example, a 35-year-old with a young family and only Rs 50 lakh of life insurance would generally be better off increasing the cover to Rs 1 crore than purchasing a Rs 25 lakh accidental death rider. A higher term cover protects the family regardless of the cause of death, whereas the rider pays only if death results from an accident, she adds.

Also read: How much health insurance cover do you need? Here’s the ideal cover for ₹10 lakh, ₹20 lakh, ₹30 lakh, and ₹50 lakh annual income as per experts

An accidental death rider should be viewed as an enhancement to an already adequate term insurance policy, not as its replacement.

If your base life cover is sufficient and your occupation or lifestyle exposes you to a higher risk of accidents, the rider can offer additional protection at a relatively low cost. However, if your existing term insurance cover falls short of your family's financial needs, increasing the base sum assured should take priority over buying an accident-specific add-on.