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Poor diets and stressful work environments have made people more susceptible to illness while decreasing life expectancy. Given the unpredictability of life, the need for life insurance is more than ever. Insurance protects your family financially in the event of an untimely death. It gives your dear ones the option of receiving the payout as regular income or as a lump sum. However, did you know that life insurance policies allow you to expand the scope of coverage by including life insurance riders#? If not, we will tell you how riders# boost the cover, but first, you must understand what they are.
How Does a Rider# Work on a Life Insurance Policy?
Life insurance riders# are optional benefits that can be used to supplement your standard insurance coverage. It allows you to customise your standard plan based on your requirements.
Riders# are available by paying a small premium over and above the cost of your standard plan. You can get them when you buy new insurance or renew your existing term plan.
Now that you have learned about the life insurance rider# definition, it is time to look at their types.
Types of Insurance Riders#
Life insurance riders differ between insurers, and what is available with one may not be available with another. Here is a list of the seven riders#.
- Critical illness rider#
Term insurance plans do not offer any monetary benefit if you outlive the policy period. This disadvantage of term insurance is most noticeable when you are diagnosed with a life-threatening illness and require financial assistance. To provide some relief, insurance companies offer a critical illness rider#. It covers cancer, heart disease, kidney failure, tumours, and a few other conditions.
Critical illness term insurance rider# provides you with a lump sum pay-out. You may use the funds for any purpose, such as treating the disease or dealing with existing liabilities or family responsibilities. Furthermore, the payment received under this policy is tax*-free.
- Accidental death benefit rider#
Accidents are common in India. It is primarily caused by driver negligence, poor road conditions, and failure to follow traffic regulations. Many believe having a personal accident rider# on their motor insurance is enough to help their family. However, we strongly disagree because ₹15,00,000 will never allow your family to live a good lifestyle, especially if you are the family's sole breadwinner. This is why buying this add-on is suggested.
- Accidental total/permanent disability rider#
Accidents do not always result in death, but they can leave victims permanently disabled, curtailing their earning potential. In such cases, this rider# pays the family a portion of the rider's# sum assured. Many insurers offer an accidental disability rider# as a supplement to the accidental death add-on.
Here is the table stating the pay-out details.
Disability case |
Pay-out percentage (of sum assured) |
Loss of sight (one eye) |
50% (100% for both eyes) |
Hearing loss (one ear) |
25% (75% for both ears) |
Loss of speech |
50% |
Loss of one limb |
50% (100% for both limbs) |
Loss of thumb and fingers |
70% for the right hand and 50% for the left hand |
- Waiver of premium rider#
In the event of disability, where the policyholder loses his earning potential and is unable to pay the premiums, the waiver of the premium rider# comes in handy. As the name implies, this rider# waives off the future premium. However, the policyholder can continue to receive coverage under the TATA AIA term insurance.
A premium waiver policy is usually accompanied by a critical illness and accidental disability rider#. However, you should confirm this with your insurer.
- Accelerated death benefit rider#
This is another type of death benefit rider#, but it operates differently. If a policyholder is diagnosed with a terminal illness, such as kidney failure, cancer, or heart ailments, the insurer will pay a portion of the sum assured. It assists the insured in covering medical expenses. If the insured dies due the illness, the insurer pays the remaining amount to the beneficiary.
- Hospital cash add-on rider#
If you become ill during the policy period and your condition necessitates hospitalisation, this add-on will come to your rescue. The hospital cash rider# provides a fixed sum based on the daily expense incurred in the hospital.
- Income benefit rider#
Under this rider#, the insurer pays the family several monthly instalments equal to the policyholder's monthly income. The instalment numbers are predetermined when you purchase this rider#. It enables the family to maintain their standard of living.
Term Insurance Rider# Importance
You may have inferred from the preceding riders# why they are important. Here is a more detailed explanation.
- Riders# keep you financially secure in any medical emergency strikes. It allows you to get best-in-class treatment without exhausting your hard-earned money.
- Rider# boosts the coverage amount. For example, if you have ₹1 crore in standard term insurance and ₹25 Lakh in critical illness cover, your coverage, in this case, will be ₹1.25 crores.
- If you had purchased a separate policy for accidental coverage or terminal illness, the premium would have been significantly more than that of riders#.
Conclusion
Additional coverage riders can be useful in many situations, such as when you are diagnosed with a critical illness or are involved in a serious accident. However, keep in mind that not all riders# are suitable for everyone. For example, if you already have health insurance with hospital cash and a critical illness add-on, it makes no sense to purchase it again. Riders# also increase the premium burden. As a result, before purchasing one, you should assess your needs. To avoid any hidden clauses, you must also read the fine print of the policy agreement.
L&C/Advt/2022/Dec/3208
