Life insurance is a protection plan and hence it should not be confused as an investment at all. The purpose of a Life Insurance Plan is to provide adequate coverage along with other benefits such as tax benefits and guaranteed income in some plans.
In order to enhance the coverage of a life insurance plan, there are options of availing additional benefits at a marginally additional cost, known as riders.
What are riders in Life Insurance plans?
Life insurance riders are additional features that can be added to your basic life insurance policy by paying a little extra premium. Just like a topping on your pizza to enhance the taste, riders help to enhance the coverage and protection benefits at an additional cost and makes your financial planning much more worthwhile.
Usually, riders in life insurance can be taken for the entire duration of the plan. It can be considered as an avoidable expense, but if taken prudently, riders can help you save a lot of money and can truly act as saviours in times of mishaps.
Different types of life insurance riders
Riders in Life Insurance Plans cannot be taken separately. It has to be taken along with a base life insurance plan. Not all life insurance plans offer all riders, it varies from plan to plan and from insurer to insurer. However, here is a list of the most common riders in life insurance plans that can be taken along with your base plan to enhance the overall coverage and provide benefits to you and your family.
- Accidental Death Benefit Rider
This is one of the most common life insurance riders wherein if the insured meets with an accident during the policy tenure and happens to die, there is an additional benefit in terms of sum assured, that is paid to the nominee along with the regular death benefit.
For example, if the sum assured is Rs 10 lakhs and the accidental death benefit rider is for Rs 5 lakhs, then if the insured dies naturally, his nominee would receive only Rs 10 lakhs as a death benefit. However, if he dies due to an accident, then Rs 10 lakhs + Rs 5 lakhs, i.e. Rs 15 lakhs would be paid out to the nominee as Death Benefit and the policy would be terminated.The Accidental Death Benefit Rider sum assured is an additional sum of money that is payable only if the insured dies within the policy tenure directly due to an accident.
- Accidental Disability Rider:
If the insured meets with an accident during the policy tenure and is disabled, a fixed amount of money would be paid to the policyholder for the recovery benefit of the insured.Now, in this rider, the benefit is paid in terms of the amount of disability. There are 3 types of disabilities such as:
- Permanent total disability:
Where the disability is a complete and total disability that is permanent in nature.
- Temporary total disability:
Where the disability is a complete and total disability but is temporary in nature such that the insured is unable to fully function for a minimum tenure as specified in the policy document, which could be 2 years or so.
- Permanent partial disability:
Where the disability is permanent in nature but does not result in complete and total disablement but makes the insured partially disabled. This is the most common type of disablement which could be a loss of one limb, eye or make him partially deaf!*In all these cases, the benefit would be linked directly to the amount of disability.
- Permanent total disability:
- Waiver of Premium Rider
Under the waiver of premium rider, if the insured individual suffers a loss of income due to permanent disability or a critical illness, the outstanding premiums are waived off.The best part of this rider is that the insured is given all the life insurance plan benefits without paying any further premiums.In the case of a child insurance plan, the waiver of premium rider is the most effective. If the parent happens to die within the policy tenure, the future premium would be waived off by the insurer but the policy is continued as per schedule. This ensures that the child’s future is secured whether the parent survives till the end or not!
- Critical Illness Rider
Under a critical illness rider, the insured individual receives financial support in case he/ she gets detected of critical illnesses like cancer, tumour, or organ failures. This rider is quite a popular add-on as it offers good coverage against common critical treatments and offers a lump sum amount when the insured is diagnosed with any of the listed diseases.
- Income Benefit Rider
In this case, if the life insured happens to die within the policy tenure, a certain predetermined amount of money is paid on a monthly basis to the nominee for the sustenance of the family’s household expenses. This rider comes especially handy if the primary earning member of the family dies untimely in an unfortunate event.
Why are Riders in Life Insurance important?
Although Life insurance plans come with multiple benefits, there are times when we desire enhanced protection, especially when it’s related to our loved ones. Life insurance riders offer enhanced protection that eases mental and financial burdens when things go wrong.
Everything cannot be included in the same plan, and therefore, life insurance riders are there to offer that extra protection anybody would need. As per the experts, life insurance riders should be considered every time you buy or renew your policy. However, it is also advised to choose your rider wisely.
The most common reasons for adding a rider to your life insurance plan could be for any of the following reasons:
- Enhanced coverage, such as accidental death benefit or coping up after a diagnosis of any of the listed critical illnesses
- Premium waiver benefit in case the primary breadwinner meets with an unfortunate death
- Tax Benefits as the premium paid towards any life insurance rider would be classified as tax-free under section 80C such as waiver of premium or income benefit, or under section 80D, if the rider is a health rider such as accidental rider, critical illness rider, etc.
- The additional cost towards the rider is minimal as compared to the benefit it provides.
- Flexibility as riders can be taken to customise a plan as per the need of the individual and is not mandatory.
- Multiple payout options are available for various riders and need to be selected as per the requirements.
How to choose the perfect Riders in Life Insurance?
The purpose of a life insurance rider is to provide extended coverage to your loved ones and not to put an extra financial burden on you. This is the reason why you should think twice before adding any rider to your life insurance plan. While choosing your life insurance riders, do have a look on:
- Your requirements and expectations from the policy
As per the rules and regulations of IRDAI, every insurer offers a set of life insurance riders for their policyholders to choose from. However, every rider is designed differently and thus, serves a different purpose. You should first analyse your family’s requirements and what kind of coverage they would need in the future. Moreover, you should also have a look at your base plan regarding what it will be offering you in case of an unfortunate situation. After all these estimations you can compare and opt for the most suitable rider for your life insurance plan.
- Your Budget
Although looking at our loved one’s future and security should be the topmost priority, we should never overlook our budget. After you have estimated your requirements, you can choose a rider that is fair enough in pricing. Moreover, you should also avoid choosing too many riders as it will just increase your premium. Going out of the budget is never recommended.
- Terms and conditions of the Company
You should read all the policy documents, terms and conditions of the plan, and its riders before buying it. This will keep you informed about how much coverage you have and what will be your part when it comes to hard times.
How to claim for a life insurance rider?
Claiming for a rider is a simple process. The documents necessary for the specific rider need to be provided to the insurer after the waiting period is over, if any. Once the insurer verifies the same, the entire amount would be paid to the insured/ nominee as the case may be.
The documents could be proof of accident with FIR copy along with doctors’ certificate for an accidental claim along with the insured’s identity and address proof, policy documents and bank account details.
For a critical illness claim, the doctor’s certificate confirming the diagnosis of the ailment of the specific severity and the reports supporting the same along with the KYC documents of the insured and the claim form.
For premium waiver benefit, there is no payout. Just that the future premiums are waived off and the policy remains inforced till the end of the policy tenure and is paid out as per schedule. Here the insured’s death certificate along with the claim form and the nominee’s KYC details along with relationship proof need to be submitted.
For an income benefit rider, the death certificate of the insured along with the nominee’s KYC and bank details are to be submitted along with the claim form for the payout.
The documents vary from plan to plan and from insurer to insurer. So, the claim details need to be verified by the insurer at the time of opting for the plan.
Life is full of uncertainties and therefore we should be fully prepared for all the tough times that may come our way in the future. Life insurance is more of a necessity now and extending its coverage will be the best thing you can do. Life insurance riders are a good way to customise a basic policy and make it much more effective and efficient. The reason why riders are all the more recommended is that at a little extra cost they offer a lot of benefits. However, before you make up your mind, it is highly recommended that you understand all the aspects of the rider. It is important that you understand the inclusion and exclusions of the product and then make a decision.
You can opt for your favourite rider at the time of policy purchase. When you select any policy, the available riders are displayed along with it. You can even check your final premium by entering the rider’s name into the life insurance premium calculator.
Yes, as per the laws of IRDAI, almost all life insurance policies offer a set of riders. However, riders offered by different companies might be different from each other in nature, coverage, and pricing.
Yes, like all insurance policies riders also come with certain exclusions. Some of them are suicide, self-made injuries, regular practice of drugs and alcohol, death or disability caused due to dangerous activities, etc.