Term insurance also called pure insurance cover, is one of the efficient and economical way to cover your financial risks. Being one of the affordable forms of insurance, it offers a hedge against prominent risks, namely life risk. To enable one to build comprehensive insurance, a variety of riders are available, which further strengthens the effectiveness of the term insurance policy. These riders can be availed by paying a small extra premium.
Here’s a way to assess the riders and choose the ones that complement your requirement effectively:
Why should you opt for term insurance riders?
Term insurance creates a safety net against the unforeseen event of an untimely death, which can potentially create financial stress for the family. While the base insurance plan covers only the untimely death of the individual (insured), there are means to cover other unfortunate events such as terminal illnesses, partial or full disability, accidental death etc., which also hurt the earning potential of the insured.
In all of the above circumstances, expenses are incurred in the form of hospitalisation, diagnostic tests, consultation fees, ambulance charges, room rent, etc. A basic term insurance policy will not offer coverage for any such expenses. To complement your base term insurance, you can avail the term insurance riders by paying nominal extra premium.
Availing separate plans to cover specific risks will prove to be expensive and may not be necessary. Hence it makes sense to use the riders, which will not only be less cumbersome but also affordable.
Types of riders for a term insurance plan:
Riders are meant to offer -additional term insurance benefits to your base insurance policy. Although it is optional to include riders, it is recommended that you avail riders that align with your requirements. This is an effective way to enhance your coverage. Upon inclusion of a rider, you will have coverage against the occurrence of the event covered under the rider. The sum paid out will be the base sum assured and the sum assured upon the triggering of the event under the rider.
1The following riders can be considered to enhance the effectiveness of the term insurance policy:
1. Guaranteed Insurability Option Rider:
As you move to a different life stage, your insurance needs will increase. This rider will ensure that the insurance company will continue to provide the required insurance as per your requirement. It insures you against the possibility of rejection of your application for renewal or increasing your life insurance coverage.1
The GI rider will come at a nominal cost (additional premium), which will enable you to buy additional insurance without having to undergo a medical test. Insurance coverage might increase might be linked to a life stage event such as marriage and childbirth.
2. CI or Critical illness Rider:
Critical illness rider provides lumpsum amount upon diagnosis of any illness that is covered under the rider. If the insured meets eventuality due to critical illness then the sum assured is paid to the beneficiary as per riders terms & conditions. If you have a family history of critical illness then you may consider availing critical illness rider.
3. Income Benefit on Accidental Disability Rider:
This rider is for policyholders who are breadwinners of the family. This rider provides access to a pre-determined sum of money for a few years by the inclusion of an income benefit rider. The family’s finances will remain unaffected due to the sudden loss of income due to the untimely disability of the breadwinner of the family.
4. Women specific Critical Illness Rider:
Many critical illnesses are covered under this rider. This is similar to the critical illness rider available. However, they are more focused on prominent illnesses that occur in women. This rider offers coverage against these terminal illnesses. The sum assured earmarked for this rider is paid upon diagnosis of the individual (insured) with any critical illness covered under the rider.
5. (WoP) Waiver of Premium Rider:
Many financially stressful events in your life can lead you to be unable to pay the insurance premium for your term insurance plan. In case you do not pay your premium within the grace period, often your policy will be terminated and you will end up with no coverage in future. You will have to go through a harrowing experience to revive the policy or may have to get a new policy drawn, both of which could be an expensive affair.
While the WoP does not offer any additional monetary benefits, the term policy will remain active even upon failure on your part to pay the premium after the deadline has elapsed, subject to the rider terms and conditions.
However, the reason for non-payment of premium has to be valid. Typically unforeseen hospitalisation, and severe injury requiring medical attention, among others, are circumstances which could affect failure to pay an insurance premium.
6. Accident and Accident Disability Benefit Rider (ADDB):
This rider would provide an additional sum assured earmarked for death due to accidents or accident disability, on payment of nominal extra premium. The payout is done upon death or disability due to an accident as per riders terms & conditions. It is in addition to the base sum assured. Accidents and associated disabilities would also lead to loss of income. To overcome this financially stressful situation, the rider can be availed. This rider is suitable for someone who is always on the field and frequently travels from one place to another in relatively traffic prone/accident-prone areas.
7. Accidental Death Benefit Rider (ADB):
Accidental death can be extremely stressful to the family, both emotionally and financially. Adding ADB as a term rider will provide some respite to your dependent family. The beneficiary would receive an additional sum assured alongside the basic sum assured under the rider, which is intended to provide financial relief to the family. This rider is suitable for a person who is engaged in hazardous work and there is a possibility of accidental death in the work environment.
Term insurance riders can help you to enhance your coverage along with your base sum assured. You can choose the appropriate riders which align with your requirement and avail the riders which complement your base plan. It is preferred that you avail riders for they help you hedge your risk more effectively.