A life insurance plan is designed as an income replacement facility for families that suffer the untimely death of the bread earner. There are many life policies available in the market, most of which offer huge covers and additional bonuses. However, sometimes a life cover is not enough as it pays only in case of death. For other unfortunate occurrences like accidental disability or critical illnesses, you need something extra. This is when life insurance riders come in the picture.
Riders are optional covers that you can add to your life policy. You can purchase them for an extra premium to enhance your existing policy.
Types of riders in Insurance
You have the flexibility to choose from various forms of riders. The availability and price of riders depend on your insurance plan. Here are some important riders to consider:
1. Accidental death
The accidental death rider allows the nominees of the policyholder to receive an additional benefit with the main life policy cover. For example, if you have a term plan cover of INR 20 lakh and you have an accidental death term insurance rider worth INR 5 lakh, the total benefit becomes INR 25 lakh.
2. Permanent disability
In some cases,an accident may cause permanent disability. This often results in loss of income. With this rider, the policyholder receives the sum assured over a certain period.
3. Critical illness
Out of all the types of riders, a critical illness rider is one of the most important ones to have. It pays you a lump sum in case you are diagnosed with any serious disease included in your policy. You can use the money to cover hospital expenses and loss of income.
Conditions of insurance policy for Riders
When buying a rider, keep these important points in your mind:
The Insurance Regulatory and Development Authority of India (IRDAI) mandates that the total premium you pay for your riders cannot be more than 30% of your basic life policy
The sum assured and the tenure of the riders cannot be more than your main life insurance policy
The benefits of the riders discontinue when the policyholder reaches the age of 65 or when the base policy matures
Life Insurance Tax Benefits for riders:
The premium paid towards any health-care related rider is eligible for a tax benefit under Section 80D of the Income Tax Act, 1961. Section 80C of the Act allows tax benefits for other riders such as accident benefit rider and disability benefit rider.
Watch outs
If you want to add riders to your life insurance policy, you need to watch out for certain things. Some insurers only you to buy riders when you are buying the base policy while insurers let you buy riders when you n renew the policy. You must buy the rider accordingly. Also, find out if your insurer allows you to buy all the riders that you require.
Riders can surely enhance your existing cover, but be sure to only add the ones that you need.
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