What Are Insurance Riders and How to Choose Them in a Term Plan?

A term insurance is one of the simplest and the most comprehensive means of financial security that can benefit the beneficiaries in case of the policyholder’s untimely passing. At low-cost premiums, one can easily secure themselves against potential life-risks at a high sum assured.

However, when opting for a term insurance plan, you can increase its effectiveness by customizing it as per your individual needs. You can do this by opting for riders.

What are Insurance Riders?

Riders in insurance are basically contingent add-ons or supplementary benefits granted over and above a primary term policy in the event of a definitive eventuality.They aim at expanding or amending the basic life insurance coverages at an additional cost. This means that they offer extended financial cover above the primary sum assured in a life insurance policy.

The insurance companies today offer varieties of riders to suit the multifarious needs of diverse individuals. With this, they offer greater risk protection to the policyholders and their beneficiaries. You may opt for distinct riders based on their importance and relevance.

In order to choose the most suitable riders, it is crucial to understand the different types of riders as well as the benefits of riders in insurance plans. Having said that, let’s have a look at the riders and their respective benefits.

Types of Riders in Insurance and its Benefits:

1. Critical illness rider

Critical illnesses are usually not included in the term policies. Hence, this rider can be included within your insurance plan to cover your family against critical illnesses and ailments such as cancer, brain tumour, heart attack, etc. While covering the cost of medical expenses these riders also provide tax exemptions under section 80D of the Income Tax Act.

2. Waiver of premium rider

Opting for this rider would ensure that the insurance plan remains active, irrespective of the policyholder failing to pay the premium amounts due to financial constraints. The effect of this rider could thereby redeem the insurance policy from lapsing completely.

3. Accidental death rider

Majority of life insurance policies provide coverage for an accidental death. However, opting for this rider would further curtail the financial stress on the deceased’s dependents since it delivers an additional sum coupled with the sum assured disbursed by the insurance company.

4. Income benefit rider

For any family, losing the sole breadwinner could result in a major financial crisis. In order to avert such a scenario, the income benefit rider provides a fixed income for a specified period of about 5 to 10 years. This is offered to the beneficiaries over and above the sum assured.

5. Accidental disability rider

This rider takes effect in case of a temporary or permanent disability caused due to an accident. During such a time, the rider provides regular coverage for about 5-10 years in a pre-defined percentage range of the sum assured. However, it must be noted that this rider comes into play only if the disability ensues due to an accident.

Important Points to Know About Riders

Rider benefits are made available to provide maximum coverage to you. Adding riders to your plan helps in getting a life cover in situations which are not covered under the insurance plan. Some insurers ask you to add riders at the time of buying an insurance plan but some insurers allow you to add them later. There are certain important conditions you should know before availing a rider benefit as per IRDA (Insurance Regulatory and Development Authority):

• There is no limit as to the number of riders that can be added to your basic insurance plan as long as they are offered for your plan
• After adding critical illness or health-related riders, the premium should not exceed 100% of the premium rate of a basic insurance plan
• Premium should not exceed 30% of the premium rate of a basic insurance plan after adding different types of riders
• Benefits received from each rider should not exceed the sum assured of the basic insurance plan
• Tax benefit can be claimed for all riders, except health-related or critical illness riders, under Section 80C
• For health-related and critical illness riders, the tax benefit can be claimed under Section 80D
• Rider benefits or claims received are exempt from tax deductions under Section 10(10D)

While you may not possess control over every imminent uncertainty, you can definitely gain control over the financial security of yourself and your loved ones by choosing the most appropriate riders in your insurance plan.