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    Accidental, Terminal & Critical Illness
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How to Choose Riders Effectively for your Term Insurance?

Term insurance offers an efficient way to cover risk. At the lowest premium, you can get a cover against the highest risk. By choosing riders, you can increase the effectiveness of a term insurance policy. You can add riders to the insurance policy by paying a little extra premium. As you assess the various kinds of risks to your life, you should include corresponding riders as well, so that you can enjoy the comprehensive coverage.

Life insurance cover

One opts for life insurance to stay safe in case of any unexpected incident that could hurt the finances of the family. Basically, insurance is a financial security tool. One may be involved in unfortunate events such as sickness or disability due to an accident. Such events will negatively impact your earning potential.

If you are hospitalized, you will need to bear hospitalization expenses which will include diagnostic tests, consultation fees, ambulance charges and room rent. A basic insurance policy will not address most of these risk factors. By buying a comprehensive insurance policy, you can overcome various health-related risks in the best possible way.

Simplicity of term life insurance

You can consider term insurance as the purest form of insurance. The premium that you pay towards the insurance policy will efficiently cover your risk. If there is a risk to the policyholder during the policy term, compensation will be offered by the insurance company. If no claim is made during the insurance term, you will not get back the insurance premium.

As the premium is very low compared with the money back policy, you can include additional riders to draw maximum benefit from the term insurance plan.

How to make the most of riders?

As per the IRDA rules, insurance companies offer various kinds of riders to offer better risk protection to policyholders. You can choose various riders as per their relevance and importance. The riders are offered to protect your and your dependents’ financial interests in the best possible way.

You should understand the fact that the sum of the premium collected under different riders should not exceed 30% of the basic plan insurance premium. The limit on health riders can be up to 100% of the basic premium.

The rider term should not exceed the policy term. The sum assured through all the riders should not exceed the sum assured by the basic premium.

Before buying the term insurance policy, you should understand the term of the rider, age at entry and sum assured and other factors that affect the insurance coverage. No riders are offered by the insurance company after the completion of 65 years of age.

Some insurance companies and plans allow rider additions only at the time of purchasing the insurance plan and new rider additions are not allowed during the renewal of the policy. You may not be able to add all the riders while buying the policy online. Hence, you should be aware of the policy terms and conditions to make the most of your insurance policy.

If you choose a critical illness or health-related rider, you will enjoy tax benefits under section 80D of the Income Tax Act. However, no tax exemption is offered under accident benefit rider. The income benefit, accident benefit, and other riders can be claimed under Section 80C of the Income Tax Act.

Riders are a great way to customize insurance policies. Insurance companies design various kinds of policies to fulfill the needs of the majority. Since the basic plan will not serve the purpose of people who come from various financial and health circumstances, riders provide an additional chance for policyholders to maximizing the benefit of insurance. Hence, you should be able to assess your current and future risks and accordingly, the relevant riders should be subscribed without fail.

If you would like to opt for different insurance policies from different insurance companies, you should be aware of the terms and conditions that are applied while claiming the policies. The claims process should be a simple and straightforward so that the very purpose of the insurance policy can be effectively served.

Types of Riders

Riders offer additional benefits to insurance policyholders. The inclusion of riders is optional. When you include a rider, they will be applied to the occurrence of the event and you will get financial assistance higher than the basic sum assured offered by the insurance policy.

You can consider some of the following riders to increase the effectiveness of the insurance policy: 

  • Guaranteed Insurability Option Rider (GI) - Your requirements from your life insurance will change with your age, lifestyle and external factors. The rider will ensure that your insurability will continue with the insurance company. The insurance company should not reject your application for plan renewal or for offering a better insurance coverage. The little additional premium in the form of a GI rider will help you buy an additional insurance without undergoing medical tests.
  • Term Assurance Rider - You can increase the risk cover to the basic life insurance policy with the subscription of a ‘Term Assurance Rider’. It is very easy to add the rider to a basic insurance plan. By paying a nominal increase in premium, you can avail a higher sum assured. The insurance company offers monthly payouts or a lump sum payout. You should read the policy documentation and understand the benefits under the term assurance rider. Some insurance companies put a limit on the sum assured of all the insurance policies bought from the same carrier.
  • Critical Illness Rider (CI) - You should include the critical illness rider if your family has a history of critical illnesses. Critical illnesses are not included in term policies. Hence, you should consider opting for the critical illness rider so that you can avail a lump sum amount towards the critical illness treatment. If the policyholder dies due to a critical illness, the sum assured will be paid to the nominee.
  • Income Benefit on Accidental Disability Rider (IB) - The income benefit rider should be included by policyholders who are the breadwinners in the family. The dependent family will have access to the fixed sum of money for few years with the inclusion of the IB rider. The family will be provided the funds managed by the insurance policy and a smooth transition will be ensured. The sudden loss of income due to the disability of the policyholder will not impact the family’s finances.
  • Women Critical Illness Rider - You can opt for critical illness cover by which cancer, first heart attack, stroke and open chest bypass surgery are covered by the insurance policy. If you are diagnosed with any of these 4 critical illnesses, you will not have to pay future premiums. However, the life cover and other benefits will continue.
  • Waiver of Premium Rider (WOP) - There are certain financial circumstances under which you may be unable to pay the insurance premium. If you fail to pay the insurance premium before the grace period, the insurance policy will lapse. No benefits are available with a lapsed insurance policy. When you buy the ‘WOP’, the term policy will be active even if you fail to pay the premium before the deadline. If you are hospitalized or succumb to your injuries, it will invariably impact your family’s financial stability. The WOP can effective in such circumstances when you fail to pay the insurance premium due to a fall in income or other financial constraints.
  • Accident and Accident Disability Benefit Rider (ADDB) - If the policyholder dies due to an accident, an additional sum along with the basic sum assured will be paid to the nominee. If the sum assured and accident rider benefits are Rs. 20 lakh and Rs. 5 lakh respectively, the nominee will get Rs. 25 lakhs + Rs. 5 lakhs. Rs. 30 lakhs will be paid to the beneficiary.
  • Accidental Death Benefit Rider (ADB) – In case of the accidental death of the policyholder, it might result in great financial stress on the dependent family members. Therefore, a clause for accidental deaths is included in the insurance policy with the subscription of the ADB rider. This allows children and spouse to overcome the financial stress as it delivers an additional sum along with the basic sum assured offered by the insurance policy. If you are working in a hazardous work environment, you can include the accidental death benefit rider.

Conclusion

As it is not possible to predict the future, you should go for the most appropriate insurance policy to address your specific needs. A term insurance policy can be customized by including or excluding certain riders. Thus, you will pay the premium for the risk coverage anticipated by you. It is advisable to include riders as they come at a low extra cost and you can gain an enormous difference in payouts in addition to the sum assured.