All you need to know about riders in a life insurance policy

A life insurance policy assures financial security to the policyholder’s family in case he/she passes away during the policy tenure. To maximize the functionalities and extend the coverage of the policy, riders are helpful. There are add-on benefits that can be attached to any existing insurance plan for an extra cost to make it more comprehensive under situations that require additional protection such as critical illness, disability, accidents, etc.

Pranav is the marketing head of a software development company in Chennai. He already has a term insurance policy for Rs 90 lakhs which he had taken five years ago when he started his career. The current job involves a lot of travel, and Pranav had to visit various cities to meet clients. As a father of two kids, he didn’t want to take any risks with his life and added an accidental death benefit rider to his exiting term plan. This rider for a sum assured of 10 lakhs is in addition to his base plan’s coverage. In case he meets with an accident, his family will be paid crore (90 lakhs + 10 lakhs) as a benefit amount. Pranav is a peaceful man now, having secured his life with additional safeguards with the help of term insurance riders.

Like the multiple variants of insurance policies in the market, many types of riders are also available. It is up to the individual to choose an appropriate rider for the desired sum assured that will suit their budget and future needs.

What are the different types of Riders?

Here is the list of 5 common types of insurance Riders as mentioned below:-

1. Accidental Death Benefit Rider
2. Critical Illness Rider
3. Income Benefit Rider
4. Premium Waiver Benefit Rider
5. Permanent Disability Benefit Rider

With the popularity of term insurance, it is generally thought that term riders are only available with term insurance, but riders can be added to any insurance policy if the insurer allows it within the plan. Some of the top riders chosen by policyholders are explained in detail below:

1. Accidental Death Benefit Rider

Accidents are becoming common nowadays due to the increase of vehicles on the road. This rider provides an accidental death benefit if the insured person meets with an accident leading to death. In this case, the nominee is liable to receive the base policy’s death benefit and the additional accidental death benefit.
For example, a 30-year-male has term insurance with a sum assured of Rs 60 lakhs. He also added the accidental death benefit rider for a sum assured of Rs 10 lakhs owing to his frequent travel plans. Thus, if he encounters death in an accident, the total benefit that his nominee will receive will be Rs 70 lakhs.

2. Critical Illness Rider

In an unpredictable environment, individuals who want to safeguard themselves against critical illnesses such as cancer, stroke, heart attack, kidney failure, paralysis, burns, etc., can opt for this rider. On diagnosis of any of the listed critical illnesses, the policyholder will receive the rider sum assured, which will help cover hospitalization, treatment, and post-treatment costs. The rider benefits will cease after successful utilization, while the base policy shall continue until its tenure.

3. Income Benefit Rider

This rider ensures that your family is taken care of financially in the form of monthly income after your demise. The policyholder can choose between 1% to 10% of the rider sum assured to be paid as monthly income for a specific period of months or years. It can be combined with a term plan where an individual has purchased only a term plan with a lump-sum death benefit but wants to create a regular source of income for his family members.

4. Premium Waiver Benefit Rider

When the policyholder encounters an accident or illness or becomes disabled, paying the premiums on time is no possibility. But with this rider, the future premiums are entirely waived off while the base policy continues to protect for the policy term. For example, if the premiums are not paid on time, a life insurance policy generally lapses. Still, by availing of this rider, the policyholder can continue to enjoy the insurance benefits even if they are not in a position to pay the future premiums.

5. Permanent Disability Benefit Rider

Accidents or illnesses need not always cause death. Sometimes, it might cause disability or dismemberment of body parts, leaving the person fully or partially disabled. In such cases, it is tough for the policyholder to resume work and continue paying the premiums for the life insurance policy they had availed. This rider lends a helping hand during those situations by waiving off the future premiums while at the same time ensuring the current policy continues to offer the same coverage for the remaining policy term.

Why do you need riders?

The prime reason to avail riders is the convenience they offer in extending the existing policy without the need to buy a new plan for addressing specific needs. For example, a term plan combined with necessary riders makes the term insurance rider benefits appear more beneficial than having an individual term plan alone. In addition, here are some of the other top benefits:

• You get additional coverage along with the sum assured of the base policy, which is a huge plus, especially if you are looking for an increase in cover during financial crisis times.
• No need to pay extra and buy a new policy since riders can be attached to existing policies.
• The ability to select from a wide range of riders suitable for specific uncertainties in life helps in planning for the unknown in advance. 
• Avail income tax benefits on the premium paid towards riders as well since they are also part of the insurance policy. 

Having read about riders’ types and advantages, you now need to choose the right term insurance rider that matches your budget, need, and lifestyle, eventually serving yourself and your family during tragic times. In addition, the possibility to add these riders to any life insurance policy makes it even more flexible to add them to your existing policies if you don’t have one already.