What Are Riders in Life Insurance?
In a life insurance plan, riders are additional coverage clauses that protect against various types of emergencies. They pay a benefit, independent of the plan benefit, if the covered contingency occurs. For instance, there’s a critical illness rider that you can choose with a life insurance policy. The rider lists different types of critical illnesses that it covers. If the insured suffers from any of the covered illnesses while the policy is in force, the rider pays the specified rider benefit. Riders can be availed on the payment of a nominal additional premium.
Life insurance plans offer different types of riders, and each rider covers a specific contingency and has a specified payout. You can choose one or more riders with your life insurance policy and enhance the coverage of the plan.
How Are Riders Linked to the Base Life Insurance Policy?
Riders are optional add-ons that enhance the overall impact of your primary life insurance policy. However, they cannot be purchased separately and are always included as an addition to your base plan. Here’s how they are linked:
- Selection – Riders are chosen at the time of the policy to purchase or added later depending on the rules of the insurer and policy t&c..
- Underwriting – Some riders may need extra health checks or declarations.
- Premium – The rider cost is added to your base premium and paid together.
- Claims – Claims under riders may be processed along with the base policy if both arise from the same event, such as death due to an accident. However, riders that provide additional benefits—like critical illness, or waiver of premium—are processed separately, as their benefits are triggered during the life assured’s lifetime.
- Continuation – If the base policy ends, riders usually lapse as well.
One of the prominent benefits of life insurance with riders is that it allows you to avail additional benefits at additional nominal cost. For example, buying a critical illness rider will provide you with a lump-sum payout if you are diagnosed with a critical illness (those from the list provided by your insurer), like cancer or heart disease, to cover the associated medical expenses.
Different Life Insurance Riders
Understanding the different riders available can help you choose the best suitable rider, along with your policy, according to your financial needs and maximize the benefits of life insurance with riders.
Here are the most common riders offered by insurers:
| Type of Rider | What Does it Cover? |
|---|
| Accidental Death Benefit Rider | This rider provides an additional payout if the life assured passes away due to an accident. The nominee receives financial support in the event of accidental death. |
| Accidental Total/Partial Disability Rider | If the life assured suffers a permanent or temporary disability resulting from an accident, this rider provides financial support by helping cover medical expenses and daily living costs. |
| Critical Illness Rider | This rider pays a lump sum if the life assured is diagnosed with a covered critical illness, such as cancer, heart attack, stroke, kidney failure etc. The payout can help cover treatment costs, recover lost income and reduce financial stress during serious health emergencies. |
| Waiver of Premium Rider | Under the Waiver of Premium (WOP) rider, if the life assured becomes critically ill, permanently disabled, or passes away (depending on the rider's terms), the insurer waives all future premiums for the base policy. This ensures that the policy continues uninterrupted, thereby maintaining the policy benefits. |
| Family Income Benefit Rider | This rider provides periodic income to the family in case of the life assured’s death, disability or diagnosis of a critical illness (depending on the riders terms). It provides a steady source of income to cover household expenses, education and other long-term financial needs. |
Benefits of Riders in Life Insurance Plans:
There are various benefits of choosing riders with your life insurance policy. Some of the common ones include the following -
1. Extra Coverage
One of the primary benefits of a rider is the additional coverage that it offers. Each rider covers a specified contingency and by choosing the relevant rider you can add extra protection to your life insurance policy by paying nominal additional premium. Extra protection means better financial security and assistance in different emergencies.
2. Affordability
The rider premium might be affordable. You can get the coverage at a fraction of the cost and enjoy additional protection without hurting your pockets.
3. Tax Benefits
Riders that cover medical expenses, like the critical illness rider also give you tax benefits. The premium paid for such riders qualifies for a tax deduction under Section 80D of the Income Tax Act of 1961. The limit of deduction is ₹25,000 if you are below 60 years of age and ₹50,000 if you are a senior citizen.
Why Are Life Insurance Riders Worth Considering?
A life insurance plan with riders can improve the impact of your policy since riders provide additional financial support for certain situations, such as accidents, critical illnesses or disabilities. They are available at a relatively nominal additional premium, making it cost-effective to expand financial protection.
Selecting relevant riders can help you meet your or family’s financial needs, ensuring the coverage aligns with your specific circumstances. Options like accidental death benefit rider and critical illness rider, waiver of premium rider, further add measurable value and security to your base insurance policy.
In short, riders are worth considering because they allow you to strengthen your policy, provide specific financial protection, and make your life insurance more comprehensive.
Key Takeaways
- Life insurance riders offer targeted coverage for specific risks, such as accidents, disability or critical illnesses, that the base policy may not fully cover.
- Riders are flexible and can be selected based on your financial needs, helping maintain financial stability for you and your family during unexpected events.
Conclusion
Riders in life insurance plans are valuable add-ons that provide extra protection at affordable rates. They are flexible as you can choose the suitable rider depending on your coverage needs. So, explore the available riders the next time you buy or renew your life insurance policy and add suitable ones to enhance the scope of coverage. Stay financially protected in emergencies other than death and enjoy peace of mind.
FAQs
1. Do I have to pay any additional premium for choosing a rider?
Yes, each rider in life insurance comes at an additional premium. Depending on the rider selected, your age, gender, rider coverage and other factors, you have to pay an additional premium for choosing the rider.
2. Can I opt for any number of life insurance riders?
Yes, you can opt for any number of life insurance riders available under a plan without restrictions. However, as per the rules, the premium of health-related riders should not exceed 100% of the premium payable for the base policy. As far as other riders are concerned, the premium of the aggregate riders chosen should not exceed 30% of the base policy premium.
3. Does the critical illness rider cover all kinds of illnesses?
The critical illness rider covers only specific kinds of illnesses. The list of illnesses covered is mentioned in the rider clause / policy document. The types of illnesses covered vary across riders. So, check the illnesses covered before selecting the rider.
4. Can riders be added to any life insurance policy?
Usually, all types of life insurance plans offer a choice of riders. However, some plans might not allow riders to be added to the base plan. So, check with the insurer when looking for riders. See which plans allow rider additions and which do not.
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