Importance Of Riders In Life Insurance

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A life insurance plan is critical in the sense that it provides protection to an individual’s family in the event of his/her untimely demise. Life insurance comes in many forms including term life insurance, whole life insurance, unit-linked investment plans (ULIPs), endowment policies, etc. All these plans come with their own range of benefits as well as limitations. In addition to the basic protection offered by a life insurance policy, most life insurance companies in the market offer various rider plans (add-on covers) to enhance the level of protection offered. These covers are completely optional, and they can be chosen according to one’s preference.

The main purpose of a rider policy is to provide cover for instances during which the scope of a base life insurance policy is limited. For instance, there may be instances during which a person may require a personal accident policy in addition to a life insurance cover. Instead of subscribing to a new policy altogether, the person may simply choose an add-on cover along with a term plan. Some of the key benefits of rider cover in life insurance can be listed as follows:

Reasons why rider covers are important

Rider covers are essential along with life insurance policies mainly for the following reasons:

• No need for multiple policies: For someone who requires additional coverage, there will be too much of a hassle in maintaining two or more policies for different types of coverage. Rider covers provide this additional coverage within a single policy. The premium might be a little extra for a life insurance plan with riders. However, it can be paid along with the premium for the base cover.
• Enhanced coverage: The most obvious reason why you should have a rider cover is the availability of enhanced coverage. The base protection offered by a life insurance policy can be enhanced significantly with the help of rider policies. In other words, you can get coverage even for adversities that are not covered by the base life insurance policy.
• Economical option: Having rider covers can be highly economical considering the range of benefits obtained in return for the money invested. Buying separate policies for these covers can be extremely costly. A proper mix of rider policies can help you save a lot of money in the long run.
• Financial planning: People worried about their family’s future in case of their unexpected death can use rider covers to plan their finances accordingly. Additional riders will bring in additional benefits to the family of the insured following an unexpected eventuality.
• Tax benefits: Policyholders may have to pay extra premiums based on the rider covers they choose. The extra premiums paid for these riders are also eligible for tax relief as per Section 80C of the Income Tax Act.

Popular rider covers available for life insurance policyholders

There are different types of rider policies available in the market. The list of rider covers available with a policy may vary from one insurer to another. The premium charges may also differ from one insurer to another. Hence, it might be worthwhile to do thorough research before subscribing to a rider policy. Let’s take a look at some of the popular rider covers available in the market.

• Critical illness rider: A critical illness policy is something that protects policyholders from a range of life-threatening illnesses. Some of the major illnesses covered here include cancer, stroke, kidney failure, heart attack, coma, burns, etc. Following the first diagnosis of any of the named illnesses, a critical illness policy pays the full sum insured amount to the policyholder.
• Accidental death benefit rider: The chosen sum insured amount is paid by the base insurance cover following the death of the insured person. In case of accidental death, the nominee not only gets the sum insured under the base plan, but also an additional sum insured under the accidental death benefit rider. The terms of this rider policy may vary among insurers operating in the market.
• Accidental disability benefit rider: This policy provides benefits against the disability suffered by the policyholder following an accident. This is also a fixed-benefit cover that pays the full amount following an eventuality. In case of partial disability, a portion of the sum insured amount will be paid to the policyholder.
• Income benefit rider: This rider cover pays a fixed monthly income for a specific period of time following the death or permanent total disability of the primary insured. This is an effective add-on cover to take care of a family’s finances against the income loss witnessed after the death or disability suffered by the insured.
• Waiver of premium rider: Life insurance cover expires if the premium amount is not paid within the grace period offered by the company. If the insured suffers income loss due to a disability, it might be extremely difficult to keep the policy active. This rider cover keeps the policy alive by waiving all the future premiums in case the insured is unable to pay the premium amount due to a disability.

Things to note while subscribing to rider policies

The benefits offered by rider covers cannot be denied. Before you subscribe to additional rider covers, it is better to consider the options carefully. Enhanced protection is good, but the overall cost could be significantly high if you subscribe to all the rider policies offered by your insurer. Hence, you must figure out your actual requirements before taking rider policies alongside your base cover. Also, you may have to plan for your family’s future financial requirements while thinking of subscribing to additional rider plans. For instance, if monthly income is a big concern for your family, you may have to subscribe to the income benefit rider plan. In a similar way, you can customise your policy according to the requirements of your family.

Conclusion

Rider policies have often proved to be effective when it comes to enhancing the level of protection offered by life insurance covers. Most insurers in the market provide flexible options to take rider policies alongside any variant of a life insurance cover, be it a term plan or an endowment policy. With the right mix of rider policies, you can get access to comprehensive coverage without burning a big hole in your pocket.