Life Insurance Riders

What is a Life Insurance Rider?

Riders are additional benefits or add-ons which you can opt for along with your current life insurance plan at low premium rates. Life insurance riders are important financial tools that helps you increasing your life insurance plan coverage.

Different insurance companies provide different benefits with their life insurance riders and therefore, you must wisely read all terms and conditions before adding them to your base plan.Let’s understand this with an example. Mr Ramesh bought a life cover of Rs. 50 Lakhs and has added the accidental death benefit rider with an additional amount of Rs. 20 Lakhs, if he faces an accidental death. Therefore, if he passes away due to an accident during the term of policy, then his nominees will receive a total claim of Rs. 70 Lakhs.

*Note: Some insurers do not allow the option to add Accidental Death Benefit with their term insurance plans.

What are the Different Types of Life 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.

• Terminal Illness Rider: This rider allows the policyholder to avail benefits if he is diagnosed with a terminal illness. In this case, the accelerated death benefit, the family/loved ones of the ailing policyholder will be able to get a sum of the life cover in advance to pay the medical expenses.

• HospiCare Rider: Under this rider, the policyholder gets to avail the benefit on his/her hospitalization as per the terms and conditions of the plan. Many insurance companies provide a certain percentage of the life cover as benefit upon admission of the policyholder in a hospital and then double the amount if the policyholder is admitted to the ICU.

What are the Benefits of Life Insurance Riders?

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.

When can Life Insurance Riders be Purchased?

Insurance riders are sold individually from insurance plans at the same time when you buy the base plan. For example: When you buy a term plan from an insurance company, you can also select the riders from the list of options provided by the insurer. However, the riders cannot be attached after the 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.

How to Choose the Best Life Insurance Rider?

Choosing the right life insurance rider can be an important decision for ensuring that you have the right amount of coverage for your needs. Here are some steps you can take to choose the best life insurance rider for your situation

• Determine your financial Requirements: Life insurance plans come with a wide variety of add-ons or riders. Some options of riders available are Accidental total and permanent disability, accidental death benefit, critical illness, waiver of premium, accelerated death benefit, and hospi-care rider. Each insurance rider has different purposes as per its features, so it is important to identify the purpose of the rider before purchasing the right cover. Always keep your needs in mind.

• Research your options: Different life insurance riders provide different types of coverage, so it's important to understand what each one offers. Common riders include accidental death benefit, accelerated death benefit, and long-term care.

• Consult with an insurance agent or financial advisor: These professionals can help you understand your options and determine which riders might be best for your needs. They can also provide information on the costs associated with each rider.

• Consider the cost: Riders can increase the cost of your life insurance policy, so it's important to consider the cost in relation to the benefits. Make sure you can afford the premiums associated with the rider.

• Review your policy’s terms and conditions: As your needs and circumstances change, you may need to adjust your life insurance coverage. Periodically reviewing your policy and riders can help ensure that you have the right amount of coverage for your current situation.

Things to Consider Before You Buy Life Plan Riders

Below mentioned are some of the points you must consider before you buy life plan riders:

• Assess your annual income and future goals before you select a rider with your base plan.

• Assess your health condition to check if you would be needing a rider, like the critical illness rider.

• Check the claim settlement ratio of the insurance company for 5 consecutive years to understand their settlement capability.

• If you have any doubt regarding your plans or riders and need more information regarding the same, you can always contact the customer service of the insurer.

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 advantage of the cost-effective add-on benefits. It is also suggested to analyze and research possible insurance riders that can help meet your requirements.

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