A term insurance rider is an attachment, amendment, or endorsement made in a term insurance policy that gives the policyholder supplementary coverage. Riders strengthen a term insurance policy by providing multiple additional benefits, apart from the core offering of a death benefit.
Most term insurance plans offer the benefit of riders. However, the riders, their conditions and their costs vary according to the term plan, the premium and the company. While some riders are included as part of the term insurance plan, other riders need to be purchased separately by paying an additional premium, after which they will be included in the policy. While purchasing term insurance, check with the insurance agent/advisor about the riders your policy qualifies for.
Here are six important riders offered on a term insurance policy:
Accidental Death Benefit Rider
During the policy term, if the insured passes away due to an accident, this rider pays an additional sum assured. The percentage of this additional sum is calculated on the original sum assured and may vary from company to company.
In some cases, there could be a cap on the maximum sum assured on this rider. However, the premium for this rider remains fixed for the entire policy term.
One misconception associated with this rider is that the policyholder will receive the sum assured only if accident is the cause of death and not otherwise. This is not the case. Even without this rider, the basic sum assured will still be paid. The rider simply promises an additional sum, over and above the basic sum assured, in case of the policyholder’s demise due to an accident.
Example: INR 60 lakhs term insurance policy is taken and the accidental death benefit rider assures an additional INR 20 lakhs on accidental death. INR 60 lakhs will still be paid in case of death not caused by accident, and INR 80 lakhs (60+20) will be paid in case of accidental death.
People who work in dangerous conditions or who travel very frequently for business purposes may take this rider. It offers a sizable cover at a relatively affordable cost.
Note: Some life insurance companies do not offer the accidental death benefit rider for online term insurance policies.
Accelerated Death Benefit Rider
When a person is suffering from a terminal illness, the aggrieved family ends up incurring heavy amounts towards the patient’s medical treatment and associated costs. If the patient has taken the accelerated death benefit rider, the family gets a part of the sum assured in advance. This becomes very helpful in those critical days.
This rider specifies how much sum assured would be payable in advance. The Accelerated Death Benefit Rider is an extremely beneficial rider that comes at a low cost.
Accidental Disability Benefit Rider
If the policyholder meets with an accident and is rendered partially or permanently disabled because of it, this rider comes into force. With the inclusion of this rider, most policies pay the disabled policyholder regularly for the next five to ten years following the accident-caused disability, in a certain percentage of the sum assured.
This rider is often coupled with the Accidental Death rider.
This rider can be relied upon as an income source. It is important to note that this rider comes into force only if the disability is caused due to an accident. The policy document lays down the exact terms and conditions.
Critical Illness Benefit Rider
With this rider, the policyholder receives a lump sum on valid diagnosis of a critical illness pre-specified in the policy. Most major illnesses are a part of the Critical illness cover, including cancer, heart attack, stroke, paralysis, coronary artery by-pass graft surgery, kidney failure, major organ transplant, etc.
Following the detection of the critical illness, the policy may either continue or terminate as per the policy terms and conditions. Sometimes, the policy coverage becomes less by the amount paid out to the policyholder.
It is advisable to read the policy document to understand the exact terms and conditions associated with this rider.
Waiver of Premium Rider
With this rider, it is assured that if the policyholder is unable to pay future premiums due to income loss or disability, the future premiums are waived off. The best part is that the policy still remains active. This rider is akin to having all your premium payments insured until policy expiry.
In the absence of this rider, if the policyholder is disabled or faces income loss due to which premiums cannot be paid, the policy will expire and no death benefit will be paid due to non-payment of due premiums.
Income Benefit Rider
This rider is primarily for income generation after the policyholder’s death. With this rider included in the policy, the policyholder’s family gets additional income per annum for five to ten years, along with the regular sum assured.
Before including riders as add-ons in your policy, understand the riders in detail, its associated benefits, all inclusions and exclusions, and compare the varying costs of different riders offered by different insurance companies. Most importantly, assess the need for specific riders and only after a complete analysis, take an informed decision to include it in the policy.
Some of these riders may be necessary keeping in mind the aforementioned eventualities. Though we cannot prevent unfortunate incidents, we can definitely plan for them. Term insurance riders are an important part of contingency planning, and their presence would help you and your family.