Term Life Insurance Plan With Riders

• Reduce taxable income by up to Rs. 1,50,000 deduction under section 80C**
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• Do more with plans that offer pure protection, retirement planning and investment options

A term insurance plan is a pure protection life insurance plan type that has gained popularity over the years due to its low cost. Term plans are simple, affordable and provide optimum coverage. A term insurance plan provides the sum assured amount to the nominee of the policy if the assured individual passes away during the chosen policy term. Term plans, unlike endowment and ULIPs, do not have a maturity benefit.

A few insurance companies offer certain riders along with term insurance plans. The riders enhance the base plan and provide extra benefits to the policyholder and his/her family. Policies with riders attached to them cost marginally higher than regular term plans. Each of the riders have different functions and hence the costs differ too. Individuals can pick riders available with the chosen plans based on the requirement and affordability.

Types of term insurance riders:

The types of riders offered with each term insurance plan depend on the insurer. Insurers may offer selective riders with each of their term plans. Here is a list of the 6 major riders generally offered with term plans:

1. Return of Premium

The Return of Premium rider is an attractive term insurance rider. A traditional term insurance plan does not offer a maturity benefit. This means that if the life assured survives the policy term, he/she does not receive the money he paid towards the policy over the years. The Return of Premium rider was introduced, keeping in mind the concern of such individuals. This rider ensures that the life assured, if he/she survives the entire term of policy, receives the total premium amount paid at the end of the term. Therefore, individuals who wish their money to be returned may choose this rider with the base term plan.

2. Waiver of Premium

An accident, a health condition, or any other factor could lead to a disability or deprive the policyholder of his/her earning potential. Under such circumstances, it is difficult for him/her to pay the premiums. In the case of a simple term plan, non-payment of premiums will make the policy lapse and the person’s risk cover will cease. But if he/she had opted for the Waiver of Premium rider, the insurer, under certain specific conditions will waive all future premiums to help the policyholder. The risk cover will continue and the policyholder can enjoy the benefits of the plan. On the unfortunate demise of the individual during the term of the policy, a death benefit will be provided to the nominee as promised at the inception of the policy.

3. Accidental Death

People who travel frequently or work in dangerous situations should consider adding this rider to the base term insurance plan. In case of accidental death of the life assured, an amount equal to the Accidental Death Sum Assured is given to the nominee of the policy along with the basic death benefit. The Accidental Death Sum Assured is, in most cases, a certain percentage of the basic sum assured. Insurers may sometimes specify age and sum assured restrictions for this rider. The additional amount will help family members cope and manage expenses that arise out of the sudden death of the individual.

4. Partial and Permanent Disability

If the life assured meets with an accident and is partially or permanently disabled, he/she can benefit from this rider. Disabilities could cause difficulty for the individual himself/herself as well as his/her family, especially if he/she is the sole earning member of the family. This rider provides benefits based on the extent of disability the individual has suffered. In case of permanent disability, the complete Partial and Permanent Disability Sum Assured is provided and in case of partial disability, a part of the sum assured is provided. Some insurance companies provide the option of receiving the benefit over a period of 5 or 10 years. The policyholder may choose to receive the benefit as a lump sum or in instalments as per the requirement.

5. Critical Illness

Diagnosis of a critical illness could be physically, mentally and financially burdensome. While the person suffers from the health condition, he/she will also have to look for ways to arrange immediate cash for consultation, hospitalisation, pharmaceutical, surgical, and other expenses. Opting for the Critical Illness rider will do away with such hassles. If the life assured is diagnosed with any of the critical illnesses mentioned in the policy, he/she is provided with a sum of money as determined by the policy. The objective of the rider is to help the individual handle financial needs arising from the treatment of the critical illness.

6. Income Benefit

If the deceased individual is the bread winner of the family, the family might face financial trouble since they will no longer have a regular source of income. The Income Benefit rider takes care of this need and ensures that the family receives a regular source of income in the form of monthly instalments. A certain percentage of the sum assured is provided as a payout on a regular basis. This way, the salary of the deceased individual will be replaced and the family need not worry about managing day-to-day expenses.

Advantages of term insurance plans with riders:

There is obviously more than one reason why one should opt for a term insurance plans and add riders to the plan, here’s why:

1. Extra coverage: The rider opted for along with the base plan will provide extra coverage for the life assured. Apart from natural deaths, accidental deaths are covered too. And the extra coverage comes at a nominal price. The premium for a Rs.5 lakh term insurance plan plus Rs.2 lakh Accidental Death rider will, in most cases, be lower than the premium of a Rs.7 lakh life insurance plan.

Note - The prices quoted above are for representational purposes only. Premium amounts differ based on the insurance company and other factors.

2. Additional expenses taken care of: Not only does the term plan function as a life insurance plan but also takes care of immediate financial requirements when the life assured is diagnosed with an illness or is physically disabled. The individual himself/herself as well his/her family need not worry about finances during such times.
3. Peace of mind: Having a life insurance policy is an assurance to a person that his/her family will be alright even in his/her absence. It is important to make sure that the future of our loved ones is secure. This gives us the ultimate peace of mind.