A life insurance policy is designed to offer the family a financial safety net in the event of the policyholder’s death. While the life insurance plan by itself can offer adequate coverage in most cases, there may be a few situations where you might feel the need for certain customized benefits.
Here’s where insurance riders come into the picture. Riders are basically add-on cover that you can opt for over and above your base life insurance plan. They help enhance the coverage provided by your base insurance plan in exchange for a nominal extra premium. One of the good things about riders is that there are multiple different options that you can choose from depending on your needs and requirements. Wondering what they are? Continue reading to find out.
The Different Life Insurance Riders
There are many different life insurance riders that you can opt for at the time of purchase of a life insurance policy. To help you understand these riders in a better manner, here’s a more in depth look at the most common life insurance riders available in the market.
1. Accidental Permanent Total/Partial Disability Benefit Rider
Now, in a typical life insurance plan, the sum assured as death benefits is disbursed to the family only upon the death of the life assured. However, if the life assured suffers an injury due to an accident that renders them either totally or partially disabled, the life insurance plan itself will not provide any benefits whatsoever.
But by opting for the accidental permanent total/partial disability benefit rider, the policyholder can receive a lump sum amount in the event of total or partial permanent disability due to an accident as per rider terms and conditions. The sum assured under this rider can then be used by the policyholder as a replacement to any loss of income that they may suffer due to their disability and rider will terminate thereafter.
2. Waiver of Premium Benefit Rider
With a life insurance policy, the policyholder is required to pay premiums regularly till the end of the premium payment term to keep the policy active.
However, in the event of any permanent total or partial disability due to an accident or upon the diagnosis of specified critical illnesses, the policyholder may not be in a position to continue paying the premiums under the policy.
With the waiver of premium benefit rider added on to the base policy, all future premium payment obligations will be waived off by the insurance service provider. This is usually done in cases where the policyholders may not be able to pay the premium, due to reasons such as any major illness or any permanent total or partial disability due to an accident etc.
The policy then continues to remain active till the end of the tenure, with neither the policyholder nor their family having to pay any more premiums. In this way, this rider helps lessen the financial obligations of the policyholder considerably.
Additionally, this rider is also useful in case the policy is taken for a child by the parent. In case of the parents’ demise during the policy term, the premium payments may be discontinued. However, if the Parent has taken “waiver of premium rider”, all future premium payment obligations will be waived off by the insurance service provider and the policy will continue to cover the child.
3. Family Income Benefit Rider
Lump sum payments may not always benefit the affected families, especially when they lack financial awareness. This can end up making their job of managing finances a whole lot tougher.
The family income benefit rider helps circumvent this limitation by paying the affected family a percentage of the sum assured under the rider each month. This is done for a specified period of time, as per the terms and conditions of the rider.
The benefit under this rider may be applicable on the death of the policyholder, upon the diagnosis of specified critical illnesses, or in case of permanent total or partial disability as a result of an accident etc.
By providing the family a regular source of income each month, this rider enables them to manage their day-to-day expenses and their life goals in a much more efficient manner.
4. Accidental Death Benefit Rider
Although a typical life insurance policy provides coverage for deaths occurring due to an accident, policyholders may want to enhance the coverage even further. The accidental death benefit rider allows them to do so.
In the event of the policyholder’s death due to an accident, the rider pays out an additional sum assured over and above the base sum assured under the life insurance plan.
One of the advantages of this rider is that the policyholder’s family gets additional sum assured under the rider by just paying a nominal extra premium. The extra coverage offered by the rider can be used by the family to further their life goals without having to worry about finances.
5. Critical Illness Benefit Rider
As you know by now, a life insurance policy pays out the sum assured under the plan only upon the death of the policyholder. However, if the policyholder gets diagnosed with critical illnesses such as cancer or heart disease etc. during the policy term, they are not eligible for any payouts under a typical life insurance plan.
With the critical illness benefit rider, the policyholder would be eligible for a lump sum payout of the rider sum assured upon getting diagnosed with any one of the critical illnesses specified under the rider in line with the rider terms and conditions.
The payout that the policyholder receives under this rider can be used by them to take care of the medical expenses associated with the treatment of their illness. The rider also ensures that the life goals of the policyholder and their family remain un impacted due to lack of finances.
Are Life Insurance Riders Worth it?
Of course. Considering the fact that life insurance riders enhance the coverage of your base life insurance plan with a very nominal premium increase, they’re absolutely worth it.
Affordability is not the only advantage of insurance riders. Since they’re basically additions to life insurance policies, the rider premiums are also eligible for tax benefits under section 80C of the Income Tax Act, 1961, subject to provisions stated therein.
That’s not all. In the case of a critical illness rider, the rider premium that you are required to pay also qualifies for tax benefits under section 80D of the Income Tax Act, 1961 as well, subject to the provisions stated therein. To get a more comprehensive idea of how life insurance riders have a positive effect, you can also use a life insurance calculator.
As you can clearly see, riders are extremely useful for policyholders looking for additional coverage over and above their base life insurance plan. However, since these add-ons tend to increase the overall premium that you’re required to pay, even though they are nominal, it is a good idea to choose only the ones that you feel may be beneficial to you.
Also, make sure to use a life insurance calculator before purchasing a life insurance plan. This way, you can easily determine just how much premium you would have to pay for your insurance policy.