Term insurance is a typical form of insurance that offers death benefit to the family of insured in the event of the latter's sudden death. We have always wished for single insurance plan to provide us multiple benefits besides its core offering (in this case, death benefit). Even if we hear about a term plan with extra benefits we turn it down thinking it would be expensive. But as they say a little knowledge is a dangerous thing, decision made by seeking incomplete information could turn out to be foolish and troublesome. Those extra benefits/ privileges that can strengthen a term plan by shedding few extra bucks are called Term insurance riders.
A term insurance rider is an attachment or amendment to an insurance policy that supplements the coverage in the policy. For instance, a waiver of premium rider will allow you to continue your term life coverage for a limited time if you are unable to pay the premium. Riders available for term insurance:
- Critical illness
- Waiver of premium
- Accidental death and dismemberment
- Accelerated sum assured
- Partial and permanent disability
Accidental Death Rider
This term rider offers you additional sum assured if the insured dies due to an accident. The investors happen to have a myth that they will receive the sum assured if death happens due to an accident, otherwise not . This is not true. If you don’t buy this rider, you will still be paid the basic sum assured. This rider is only for the supplementary sum assured in case the policyholder faces death due to accident. So if you purchase a policy of 70 lacs sum assured with accidental rider of 25 lacs. You will get 70 lacs in case the death is not because of an accident and 95 lacs in case of death due to accident.
Permanent & Partial Disability
This rider becomes greatly useful if you face permanent disability or temporary due to accident. In such scenarios, most of the policies pay you regularly for next 5-10 yrs in a certain percentage of Sum Assured. For example, 10% of Sum Assured per year for next 10 yrs. You can therefore rely on this rider for an income source. Please remember that this rider comes into force only if the disability happens due to accident. Read the policy document of the company carefully to understand the exact wordings. Quite often, this term insurance rider is combined with Accident Death rider.
You receive lump sum amount if you are diagnosed with an illness which is pre-specified and is mentioned in the policy. Usually, all the major illnesses are part of Critical illness cover. Some of the examples of critical illness mentioned are Heart Attack, Cancer, Stroke, Coronary artery by-pass graft surgery (CABG), Kidney failure and Paralysis for example. After the critical illness is detected, the policy might continue or terminate as per the policy document. At times, the policy coverage lessens by the amount paid to you. So understand the policy document to know exactly what will happen in this rider.
Waiver of Premium
This rider ensures that your policy doesn't get entitled for surrender you falter in paying your future premium due to disability or income loss. In such cases, the future premiums get waived off but your policy is still in force as always. This in a way, is insurance of the premium payment till your policy expires. In case this rider is unavailable and you are disabled and are eventually not able to pay the premiums, the policy would expire and you will not get any death benefit at the time of your death as due to non-payment of premium the policy expires and the cover stops.
Income Benefit Rider
This rider is part of some policies and it’s mainly for the income generation after death of the policyholder. If this rider is present, the policy holder’s family gets supplementary income per year for 5-10 yrs along with regular Sum Assured. For example, 10% of Sum Assured for next 10 yrs will be received by the policy holder’s family.
The riders sure seem like a necessity if we consider eventualities like the ones mentioned above. Its true that we cannot prevent such incidents from happening but we can very well plan for them. Term insurance riders are part of such planning; their presence in your life would help both you and your family.
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