Overview of Life Insurance Riders
A life insurance policy covers a specified contingency. For instance, life insurance plans cover the risk of a premature demise. If the insured passes away, the policy pays a death benefit. However, if the insured suffers a critical illness or becomes disabled but is alive, usually, no benefit may be paid under a regular life insurance plan.
There are different types of contingencies which might cause a financial strain and to cover such additional contingencies, riders may come in handy. Riders in life insurance are additional coverage benefits that cover specified contingencies and pay a benefit if the covered contingency occurs.
What Are Riders in Life Insurance?
In a life insurance plan, riders have additional coverage clauses that cover different types of emergencies. They pay a benefit, independent of the plan benefit if the covered contingency occurs. For instance, there’s a critical illness rider which you can choose with a life insurance policy. The rider lists different types of critical illnesses that it covers. If the insured suffers from any of the covered illnesses while the policy is in force, the rider pays the specified rider benefit. Riders can be availed on the payment of nominal additional premium.
Life insurance plans offer different types of riders and each rider covers a specific contingency and has a specified payout. You can choose one or more riders with your life insurance policy and enhance the coverage of the plan.
How Are Riders in Insurance Plans Linked With The Base Policies That You Buy?
Riders in life insurance plans are additional benefits which are available with a base life insurance policy. You cannot buy the rider independently. This means that you need to choose a life insurance policy before you can choose the rider. Each policy offers a set of optional riders and you can choose one or more from the available riders in life insurance plans. Some points to be noted are as follows –
1. While riders in life insurance plans are optional, in some plans, one or more riders can be built into the coverage structure. This means that you may not have to choose some riders separately since they may already be added to the plan’s coverage. A very common example is the waiver of premium rider which is usually inbuilt in some child based insurance plans.
2. Each rider in the life insurance plan requires an additional premium. The premium depends on the rider tenure, rider sum assured, your age and other factors.
3. The rider sum assured is usually less than or equal to the sum assured of the base life insurance policy. However, there’s a maximum limit to rider sum assured.
4. The rider’s tenure is also usually equal to the policy tenure. The tenure can be lower but it cannot be higher than the base plan’s tenure.
5. The coverage of the riders in the life insurance plan stops as soon as the coverage of the base plan stops.
Different Life Insurance Riders
As mentioned earlier, different types of life insurance riders are offered by different Insurers. Some of the common ones include the following –
| Type of Rider | Coverage Offered |
| Accidental Death Benefit Rider | This rider covers accidental deaths. If the life insured passes away during the entire policy tenure due to an accident, this rider would pay an additional benefit apart from the death benefit paid under the policy. |
| Accidental Total/Partial Disability Rider | This rider is similar to the aforementioned rider with the addition of disability. If the life insured becomes permanently disabled due to an accident, coverage is granted. The rider pays a benefit depending on the severity of the disability suffered. It might also cover temporary total disabilities in which case a weekly benefit may be paid for a said number of weeks. |
| Critical Illness Rider | This rider covers a list of critical illnesses. If the insured suffers from any of the covered illnesses, the rider sum assured is paid in a lump sum. |
| Waiver of Premium Rider | The rider waives the premium of the policy in any one of the two cases:
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| Family Income Benefit Rider | This rider allows you or your loved ones to receive periodic payments in case an unfortunate event occurs like disability due to an accident, diagnosis of a critical illness etc. |
Various Life Insurance Riders That You Can Opt For
The choice of a rider in a life insurance plan depends on your needs. Here’s how –
1. The accidental benefit rider may be suitable for all as it covers accidental deaths which can happen to anyone
2. A critical illness rider may make sense if you have a family history of illness
3. The family income benefit rider is useful if you want to create a source of regular and fixed income for your family in your absence.
4. The waiver of premium rider may be suitable to secure your family’s financial future in the event of your death or disability.
So, assess your needs and then choose the relevant riders with life insurance plans for additional protection.
What Is an Accidental Death Benefit Rider?
The accidental death benefit rider is one that covers accidental emergencies. If the life insured passes away due to an accident, the rider pays a lump sum benefit. For instance, say the plan has a base sum assured of ₹25 lakhs and an accident benefit rider worth ₹5 lakhs. In the case of accidental death, the total payout would be ₹30 lakhs.
In some cases, the rider might also cover accidental disabilities. This adds another layer of protection as the policyholder gets financial assistance in the case of accidentally suffering disabilities.
Reasons to Opt for Accidental Death Benefit Rider
The accidental death benefit rider makes sense because of the following reasons:
1. Accidents are uncertain and may occur at any time. Additional financial protection against them is a good choice as it would give your family added support in difficult times.
2. The rider premium may be affordable, making it easy on your pockets.
3. If disabilities are covered, you can get added coverage for such contingencies.
Are Life Insurance Riders Worth It?
Each rider offered with life insurance plans adds to the financial protection that you seek from the policy. Riders cover additional financial contingencies that you might suffer and provide extra financial assistance. The rider premiums are a fraction of the base premium while the coverage offered is considerable. Moreover, the riders are optional and depends upon your requirements.
So, life insurance riders are nothing but added layers of protection which, when added to the base policy, can make the coverage comprehensive and help you deal with the additional challenges that life might throw your way.
Benefits of Riders in Life Insurance Plans:
There are various benefits of choosing riders with your life insurance policy. Some of the common ones include the following -
1. Extra Coverage
One of the primary benefits of a rider is the additional coverage that it offers. Each rider covers a specified contingency and by choosing the relevant rider you can add extra protection to your life insurance policy by paying nominal additional premium. Extra protection means better financial security and assistance in different emergencies.
2. Affordability
The rider premium might be affordable. You can get the coverage at a fraction of the cost and enjoy additional protection without hurting your pockets.
3. Tax Benefits
Riders that cover medical expenses, like the critical illness rider also give you tax benefits. The premium paid for such riders qualifies for a tax deduction under Section 80D of the Income Tax Act of 1961. The limit of deduction is ₹25,000 if you are below 60 years of age and ₹50,000 if you are a senior citizen2.
Conclusion
Riders in life insurance plans are added tools of protection available at affordable rates. They are flexible as you can choose the suitable rider depending on your coverage needs. So, explore the available riders the next time you buy or renew your life insurance policy and add suitable ones to enhance the scope of coverage. Stay financially protected in emergencies other than death and enjoy peace of mind.
FAQs
1. Do I have to pay any additional premium for choosing a rider?
Yes, each rider in life insurance comes at an additional premium. Depending on the rider selected, your age, gender, rider coverage and other factors, you have to pay an additional premium for choosing the rider.
2. Can I opt for any number of life insurance riders?
Yes, you can opt for any number of life insurance riders available under a plan without restrictions. However, as per the rules, the premium of health-related riders should not exceed 100% of the premium payable for the base policy. As far as other riders are concerned, the premium of the aggregate riders chosen should not exceed 30% of the base policy premium1.
3. Does the critical illness rider cover all kinds of illnesses?
The critical illness rider covers only specific kinds of illnesses. The list of illnesses covered is mentioned in the rider clause / policy document. The types of illnesses covered vary across riders. So, check the illnesses covered before selecting the rider.
4. Do riders increase the cost of life insurance?
Yes, riders increase the cost of life insurance since they provide additional coverage. Life insurance companies charge an additional nominal premium for the additional coverage provided through riders.
5. Can riders be added to any life insurance policy?
Usually, all types of life insurance plans offer a choice of riders. However, some plans might not allow riders to be added to the base plan. So, check with the insurer when looking for riders. See which plans allow rider additions and which do not.
References
1. https://policyholder.gov.in/documents/38105/41782/Life+Insurance+Riders+Handbook.pdf/06c8d157-4ed3-319f-82d0-c67c95bdbc53?t=1631522672639&download=true (page no 6)
2. https://cleartax.in/s/medical-insurance
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