Life Insurance Riders

Financial security and independence are the crucial reasons why we require to have some income source. However, incomes are inclined to setbacks, that can happen because of any of the parameters which are not in your control. In order to be safe from these kinds of risks, building wealth is important by investing some amount in life insurance plans.

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Life insurance policies are the financial backup for emergencies that have big financial concerns such as unforeseen demise. Losing a sole earner can be financially devastating for a family but life insurance provides them the financial protection to stay safe. 

Unfortunately, there are a number of causes that can interfere with their financial comfort and that is why most life insurance policies will give you the option of insurance riders. 

What is a Life Insurance Rider? 

An insurance rider is an add-on or additional insurance coverage which a policyholder can add to his/her current base plan. For example, at the time of buying a term life insurance plan, the term policy is your base plan. 

Rider meaning in Insurance: In simple words, an insurance plan rider is a modification or provision to an existing insurance plan that offers additional coverage i.e., the extra protection against risk. Insurance riders are add-ons that you can opt for along with your existing term insurance plan at low premium rates, to enhance the life insurance coverage. Also, riders make your term plan coverage wide and robust. 

Types of Insurance Riders 

  • Accelerated Death Benefit Rider: It is an added feature that comes as an additional rider and allows a life assured or his/her nominee to have additional advantages. Apart from the benefit of the base plan, it allows additional coverage at the time of the policyholder’s death due to any pre-specified condition. 

  • Accidental Death Benefit Rider: All life insurance plans cover accidental death benefits. However, when you purchase an accidental death benefit rider, the insurance company pays up to double the sum assured to the policyholder’s nominee in case he/she dies due to an accident. 

Let’s understand this with the help of an example: 

An individual who already has a current accidental insurance plan for Rs. 20 Lakhs and has no liability may not require to include the accidental death rider benefit with his/her term plan. But if he/she is not sufficiently covered under life insurance and is financially incapable of availing of another plan for accident cover, then he/she may opt for the accidental death benefit. This can create a cost-effective mode of adding financial protection for his/her survivors in the unforeseen event of accidental death. 

  • Accidental Disability Rider: In the unfortunate event of any sort of disability, this rider offers financial protection. This rider must be chosen according to the actual need and not accidentally. 

  • Critical Illness Rider Benefit: This rider benefit is paid in case the policyholder gets diagnosed with any of the critical illnesses mentioned in the policy document such as stroke, cancer, kidney failure, heart attack, etc. In such cases, the critical illness sum assured is paid. The benefits and the rider premium for this benefit cease afterward. This acts as an income replacement plan because the money received under the rider can be used to fulfill both household and medical expenses. The critical illnesses covered under the plan may vary from one company to other. 

  • Income Benefit: It is a regular source of income that allows the nominee of the policyholder to get a specific amount as a fixed income in the unforeseen event of the policyholder’s death during the policy term. 

  • Waiver of Premium: This rider benefit ensures that the life insurance plan remains active if you are not able to pay your premiums. The effect of this plan would waive off all the future premiums but the policy benefits will be continued. This rider benefit also extends to partial and permanent disability.

What are the Benefits of Life Insurance Rider? 

There are a number of benefits offered by the rider to enhance the coverage of the existing term plan:

  • Better Protection: One of the most important reasons to add riders to your life insurance plan is that you want your loved ones safe from more than one risk. No doubt, death is the ultimate cause of a family’s financial problems. But, life-threatening illnesses, accidental disabilities along with expensive treatments equally destroy your life. So, adding riders to your life insurance policy adds more protection to the plan and secures your family’s future. 

  • Extra coverage: By adding a rider to a base life insurance plan, one can enjoy extensive coverage. For example, a critical illness rider benefit pays a lump sum amount which can be used in loan EMIs, household expenditures, and other financial liabilities. 

  • Flexibility: You can attach a rider to any of your life insurance plans i.e., Term, ULIP, whole life, endowment and customize your plan as per your requirements. 

  • Affordability: Purchasing a rider is much more economical than purchasing an individual insurance plan. Additionally, there are several types of riders which one can choose as per their requirements. So, it becomes easy to provide coverage at low premium rates. 

  • Tax Benefits: Riders are add-ons to the life insurance plans. Therefore, payments towards insurance riders also enjoy tax savings benefits as per the prevailing income tax laws. 

The insurance riders come with certain terms and conditions; the premium amount about health associated or critical illness rider benefits shall not be more than 100 percent of the premium amount under the term plan, the premium amounts under all other riders in total shall not exceed 30 percent under the base plan and any advantage arising under each of the defined rider benefits shall not exceed the SA amount under the base product. 

How Can Insurance Riders be Purchased? 

Insurance riders are sold individually from insurance plans but at the same time. For example: When you purchase a term insurance plan from an insurance company, you can also select the riders from the mentioned list. It should be noted that these riders should be purchased at the time of buying the base insurance plan. The riders cannot be attached after the base plan is bought. It is important to take time in evaluating whether or not investing in an insurance rider is beneficial. While some insurers have in-built rider benefits in the standard life insurance plans, others have flexible policies, which can be personalized according to your requirements. 

Wrapping It up!

It is always good to know what your insurance company has to offer so that you can receive the most of your life insurance plan and take the advantage of the cost-effective add-on benefits. It is also suggested to analyze and research possible insurance rider that can help meet your requirements.

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