Understanding Term Insurance Riders

• 21st Sep 2021
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There’s no denying that people do not want a One Size Fits All solution for anything. From what you wear to how and where you eat, you appreciate the option to customize everything as per your needs and convenience. Likewise, when it comes to one of the most important financial decisions you take for your family’s secure future, you are on the lookout for ways to enhance your coverage.

When you think of ways to boost your life coverage plan to support your dear family, what proves beneficial is a protection rider! It gives you the opportunity to add extra security to your plan, by paying a slightly higher premium. Term insurance is nothing but a pure life cover policy that provides for your family in case of an unfortunate event. Insurance riders are the extra benefits or privileges that bolster your term plan by shedding a few extra amounts. Term insurance is a fundamental but essential financial product and adding suitable riders with your insurance policy makes it comprehensive, providing the extra firepower.

Riders: The Insurance Add-Ons

While most term insurance policies provide the benefit of riders, their costs and conditions vary per the term policy, premiums and the company. Buying a term rider means paying extra, but the additional premium is generally low because relatively little underwriting is required, and their sum assured is less than the insurance cover. These premium amounts depend on different aspects like – the sum assured, age of the policyholder, policy term selected, payment term, etc.

Some riders can be purchased as stand-alone insurance as well. Critical illness insurance, for example, is available as a stand-alone policy and a rider with term and health insurance plans. In addition, some of the riders are available as add-ons to your insurance policy.

Term Riders: Quick Facts

• You can only take riders with an insurance plan and not buy it separately
• Rider premium rates are less than those for term insurance policies
• Sum assured of riders is generally less than basic insurance plans
• Riders are helpful when an unfortunate incident occurs to a person

Riders That Drive Your Coverage

Below mentioned are the common riders in insurance and what they cover:

Accidental Death Rider

An Accidental Death Rider provides an additional layer of security to your family’s future by offering an additional sum assured if you pass away due to an accident.

Essential Facts

• It is applicable only in case of an accident
• Since this rider covers untimely death, the premium charged is low and is fixed for the whole term
• Whether you travel frequently or work in dangerous conditions is taken into account
• If death occurs within three months of the accident, the family is entitled to appended sum assured
• Limit is imposed on the maximum sum assured of death benefit rider

Permanent and Partial Disability Rider

Whether you succumb or survive disabled in an accident, your family would equally be left in the lurch. So, your financial burden in such cases is borne by a permanent or partial disability rider. It protects your family’s future by covering the risk and substituting your income.

Essential Facts

• It only takes effect if a person becomes disabled as a result of an accident.
• The terms and conditions vary depending on the insurer.
• This rider is frequently used in conjunction with the Accidental Death Rider.

Critical Illness Rider

Major illnesses such as cancer, heart attack, kidney failure, coronary artery bypass surgery, and paralysis not only have an emotional impact on you and your loved ones, but the necessary treatment can also deplete your savings. Upon diagnosis with a critical disease pre-specified in the policy, the Critical Illness Rider can cover you with a lump sum amount.

Essential Facts

• Not all the illnesses are covered in the rider, so you need to read the policy documents carefully
• Rider covers the cost of critical illnesses, unlike health insurance
• It compensates for the loss of earnings
• It lasts till the term insurance policy
• The premium does not increase till the complete duration

Waiver of Premium Rider

Consider a case where you have been paying insurance premiums for a long time but cannot do so due to a disability. In most cases, your insurance will expire, and you will receive a no-death benefit due to non-payment of premiums. However, if you choose this rider, your premiums will be waived if you become disabled during the period.

Essential Facts

• The rider waives off your premium, but the plan remains active
• It reduces financial concerns of paying future premiums
• It is suitable for those with a risky lifestyle
• The issue of faltering in premium payment does not arise

Income Benefit Rider

When you pass away, ensuring a steady flow of income for your family becomes a significant concern. If you opt for this term insurance rider , your family or nominee will get additional income in addition to the sum insured amount for the next 5-10 years.

Essential Facts

• A specified percentage of the sum assured will be received by the family/nominee
• It is more suitable for salaried individuals who are the primary breadwinners.

Whichever rider you select, you should not forget to read its terms and conditions before opting for it thoroughly. Riders in insurance prevent you from compromising with the future of your loved ones by offering additional coverage. It allows your family to remain financially stable and lead a peaceful life with your memories, regardless of whether you are around or not.

- A Consumer Education Initiative series by Kotak Life