Since we buy life insurance to protect our family in the long run, it is beneficial to buy certain key riders along with the base policy by paying an extra premium. Riders are additional benefits which a policyholder can opt for along with the basic cover to expand his life insurance coverage. Riders can help in customising the life insurance policy, give additional protection against risk on top of the basic sum and can be useful in times of financial crises, especially at a time when the Covid-19 pandemic has taken lives of many breadwinners.
While some life insurance companies offer plans which have in-built riders in the basic plans, others have flexible-plans and a policyholder can choose according to his needs. Life insurers offer various types of riders such as critical illness, permanent disability, accidental death and waiver of premium riders. In fact, accidental disabilities and life-threatening illnesses, which entail expensive treatments, can cause financial stress to the insured and his family.
Riders can mitigate that to a large extent.
Buying a rider is much more affordable than buying a separate insurance policy and the insured can get tax deductions under Section 80C, 10(10D),115BAC and other provisions of the Income Tax Act, 1961. Policyholders can buy riders to any insurance plan—term plan, endowment plan or even unit-linked plan. However, the premium on the critical illness riders cannot exceed 100% of the premium under the basic product and premiums under all other life insurance riders in total cannot be over 30% of premium paid under the basic policy.
Critical illness rider
Under this rider, the insurance company will pay a lump sum or give periodic payouts, over and above the sum assured, in case the policyholder is diagnosed with any of the specified critical illnesses listed in the policy document such as heart attack, cancer, brain tumour, kidney failure, etc. Policyholders must see the entire list of critical illnesses covered in the policy as it varies from company to company. The lump sum can be used for medical treatment and even for household expenses and paying loan EMIs.
As the policyholder will suffer loss of income because of the critical illness, the pay-out will help him pay for the treatment costs, support his family financially and compensate for the loss of income immediately. After payment of the lump sum, the insurer terminates the additional rider. However, the policyholder’s base policy continues. Experts say critical illness rider has gained a lot of traction after the Covid-19 pandemic because of its multi-organ effects.
Waiver of premium rider
Under this most popular rider, if an insured person dies during the policy term, or suffers a disability and is unable to pay future premiums on the policy, the insurer will pay all premiums due if the insured had opted for the waiver of premium rider. On maturity, the beneficiary of the deceased policyholder will receive the full maturity benefits according to the terms of the policy. The waiver of premium rider is available along with the accidental and permanent disability or the critical illness rider. However, if the insurance company is not offering it then the insured can buy it separately.
Permanent disability rider
This rider helps in case the insured is permanently disabled due to an accident which renders them incapable of working for a living. The insurer pays a certain sum assured for a period depending on the policy terms. Typically, most insurers pay a percentage of the benefits accrued due to the rider every month for a specified number of years. Moreover, all future premiums on the base insurance policy are waived off by the company. If the policy holder dies during the tenure of the policy after having suffered from the permanent disability, the outstanding sum assured is paid to the nominee of the policyholder.
Accidental death benefit rider
If the life insured dies due to an accident, the nominee is paid the death sum assured in addition to the basic sum assured of the policy. So, if one does not have a separate personal accident insurance policy, then this rider can be a very-cost effective one to purchase to protect the family financially.
If you are planning to buy a life insurance policy, look at the riders that are offered by your insurance company, understand the inclusions and exclusions and the additional premium that you have to pay. Look at the maturity period of the riders as some riders like critical illness may expire before the maturity of the base life cover. So, after accessing your needs, decide on the specific riders to buy and make your life insurance cover a comprehensive one.