What are Term Insurance Riders and their benefits?
Term insurance secures the financial commitment of your family when you are no longer around them, with the sum assured paid by the insurance company on your demise during the policy term. To extend the functionality of term insurance policy to cover more uncertainties of life like accidents, critical illness, disability, etc., you may opt for term insurance riders.
Rohit Bhansali, a businessman from Gujarat, had taken a LIC term life insurance policy with coverage of Rs 1 crore. Recently, he was diagnosed with cancer and was advised to start treatment immediately. He had no other choice but to shut down his business and moved to Chennai to get Cancer treatment. His wife and son also stayed with him to help and support Rohit emotionally. However, with the business closed and moving to a different city for hospitalization and treatment, he had to bear all the expenses himself, putting him in a severe financial crisis. Rohit recovered completely after three years but had debts to clear, which he borrowed for cancer treatments.
If he had bought a rider with his LIC plan such as a critical illness rider, along with the term insurance policy, it would have provided a lump sum amount that would have helped him take care of all the costs related to treatment, hospitalization, and post-surgery care. However, along with this, it would have given him and his family peace of mind to focus on the recovery rather than worry about the finances and spend all their energy in mobilizing funds for daily expenses.
A rider meaning, it is nothing but an additional cover to enhance the policy’s scope by protecting against specific situations. However, riders come at an extra cost which will be added to the policy’s premium. In addition, once the rider’s benefits are used, it shall result in the termination of the rider while the policy will remain in force.
Types of Term Insurance Riders
There are many variants of term insurance policies available in the market, but you must choose the ones that you require.
- Premium Waiver Benefit Rider
- Accidental Death Benefit Rider
- Accidental Permanent / Partial Disability Benefit Rider
- Critical Illness Rider
- Family Income Benefit Rider
Let’s know about Term Insurance Riders in detail:
- Premium Waiver Benefit Rider: From the name, you could understand that this rider gives the benefit of waiving the future premiums if the policyholder becomes permanently disabled and is unable to pay the premiums during the policy term. A term insurance policy generally lapses when the premiums are not paid. Still, with such a rider, one can continue to enjoy the coverage benefits even if they cannot pay the premiums.
- Accidental Death Benefit Rider: If the insured person dies in an accident, an additional death benefit is payable to the nominee in addition to the death benefit assured under the regular term insurance policy. For example, suppose the policyholder had availed a term plan for a sum assured of Rs 1 crore and opted for an accidental death benefit rider of Rs 25 lakhs. In that case, the total amount receivable will be Rs 1.25 crores if the insured dies in an accident.
- Accidental Permanent / Partial Disability Benefit Rider: Sometimes, accidents may not cause the person’s death but could leave them disabled totally or partially. Such situations make it challenging for the policyholder to work and pay premiums for the term insurance policy. This rider is very helpful in such cases, where you may become temporarily or permanently disabled due to involvement in the accident. Apart from waiver of future premiums, some insurers also pay a certain amount for the next few years while still offering coverage benefits.
- Critical Illness Rider: This is a crucial rider and the most beneficial among all term insurance riders. Suppose the policyholder gets diagnosed with any critical illnesses listed in the policy document, such as cancer, stroke, heart attack, kidney failure, paralysis, burns, etc. In that case, a lump-sum amount is paid which can be used to meet the expenses for treatment while continuing to get life coverage from the term plan.
- Family Income Benefit Rider: With this rider, you can be sure your family is financially secure even when you are not around them. This rider helps the policyholder’s family handle the difficult times by providing them with a monthly income, between 1% to 10% of the rider sum assured for a specific period of months or years. One can choose an appropriate sum assured depending on the needs of each family member and their overall lifestyle. This rider is hugely beneficial for individuals who have many dependents to support.
Benefits of Term Insurance Riders
Although it is not required to talk about the term insurance rider benefits after explaining the rider variants and their usefulness in the above section, to sum it up, here are the top benefits:
- Additional coverage: A term plan by itself provides you with good coverage but attaching a rider to it provides you with complete protection and makes your life stress and worry-free during times of financial crisis.
- Easy to afford: Rather than buying a separate insurance policy, buying a rider is more affordable since you need to shell out only a few extra bucks as a premium.
- Wide choice: There is a rider for all common uncertainties of life, making it easy to choose and customize the term plan according to your needs and future requirements.
- Income Tax benefits: Since riders are part of a term plan, the premiums paid towards them can be claimed under Section 80C, 80D, and 10(10D) of the Income-tax act.
Having read about the riders available in the term insurance policies, it is now up to you to assess which rider is essential for yourself and the family. As who wouldn’t want a little more extra financial security if something untoward happens to them? When life is very uncertain, it is not worthwhile to leave any opportunity that presents itself in the form of riders, to enhance your protection through insurance.
