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Riders are additional benefits that can be
purchased with a life insurance policy to enhance your insurance cover. These
are extra features that you can add to your basic insurance policy to protect
yourself against a host of unexpected tragedies. Riders typically cost extra in
premium and add value, flexibility as well as safety to the core coverage
during the life of the policy. All life insurance riders get tax benefit under
section 80C, subject to the overall limit of R1.5 lakh. Riders can be attached
to all types of insurance policies endowment, moneyback, whole life and
unit-linked insurance plans (ULIPS). While riders can be added anytime to your
policy, it is wise to opt for them while buying the main policy.
How much do they cost?
Most riders are relatively inexpensive. A
rider generally costs around 510 per cent of the total premium you pay for your
basic cover. There is no limit to the number of riders that you may attach to
your basic cover, but the premium on all the riders together should not exceed
30 per cent of your base premium. However, keep in mind that when you take
multiple riders, your premium amount escalates and this may pinch your pocket.
How beneficial are riders?
Suppose you buy a life insurance policy with a
sum assured of R5 lakh, which has an accidental death benefit rider. In case of
normal death, your nominee will get the sum assured as a death benefit. But if
you die in an accident, you might get up to double the sum assured. The chances
of you dying in an accident are low, that is why you pay a small premium in
addition to the basic premium that you pay for your life insurance policy.
Types of riders
Here
is a list of most common life insurance riders that you may come across while
buying a base life insurance policy. Please note, this is not a complete
list.
Critical Illness Benefit.
This is the second most useful rider that will take care of your medical
expenses in the event of a critical disease. Every insurance company has a list
of illnesses that are under the policy. If you are diagnosed with one of them
during the term of the policy, the insurance company will pay a lumpsum amount.
Waiver of Premium. This WOP rider
will override the insured's need to make payment of future premiums in the
event that he becomes either permanently disabled or loses income as a result
of an accident or illness. So your premiums are waived but your cover still
continues.
Guaranteed Insurability.
This rider allows the insured to purchase additional amounts of insurance at
specific ages without requiring proof of insurability. That is, without needing
to take a physical examination. This rider is useful if you need to buy
additional insurance to keep pace with changing life circumstances, such as
when you get married or have children.
Disability Income. The
disability income rider guarantees a monthly income from the insurance company
if the policyholder becomes totally and permanently disabled, for as long as
the disability lasts. Beware of exclusions and inclusions. Make sure that you
check with the insurance company not only the terms and conditions of its
riders but also the specific meanings of the words that the insurance company
uses to describe situations in which the rider provides benefits.
Why are riders popular?
The main reason is that riders offer high
value at a low cost and they offer extra protection without you having to buy
a second policy. While most life insurance policies are standardised and may
not give you the liberty to modify them according to your individual needs,
these riders empower you with much-needed control over your changing life
situations.
Finding the best riders
Riders are not very complex but many insurance
buyers find it extremely difficult to choose the right rider due to two
reasons. One, a large number of riders available at affordable prices make it
difficult to choose the right ones. Two, insurance agents try to sell as many
riders as possible as they make more money for themselves.
The solution to the problem: Do not buy a
rider just for the sake of it. Always ask yourself whether you really need the
extra cover. For example, if you travel a lot by road or if you are into a job
that requires a lot of travelling, it would be wise to buy an Accidental Death
Benefit rider.
Fabulous knowledge for customers
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