Do you really need a rider for that extra cover?

When you purchase a life insurance policy, you can buy certain additional benefits with it to enhance your insurance cover. These additional covers are known as riders. Riders are nothing but extra features that you can add to the basic insurance policy. In turn, they ensure that you are protected from a range of unexpected tragedies. Riders will cost you extra in premium and add value, safety, and flexibility to the core coverage of the life of your policy. Additionally, all life insurance riders have tax benefits under Section 80C, subject to an overall limit of INR 1.5 lakh. Riders can be attached to different kinds of insurance policies, such as money back, endowment, whole life, and unit-linked insurance plans. And though you can add them any time to your policy, it makes more sense to opt for them at the time of purchasing your main policy.

How much do riders cost?

Most riders are not very expensive, and usually cost around five to ten percent of the total premium that you will pay for your basic cover. There is also no limit to the number of riders that you can attach to your basic cover. However, the premium on all riders together should not exceed more than 30 percent of your base premium. Do bear in mind that when you take multiple riders, your premium amount also shoots up, and this may cost you extra amounts.

How advantageous are riders?

Take the example of a life insurance policy for instance. Let us say you bought a policy with an assured amount of INR 5 lakhs, with an accidental benefit rider. Suppose you die a normal death. In that case, your nominee will get the assured sum as the death benefit. However, if you die in an accident, your nominee might get double the amount. However, the chances of you dying in an accident are low. This is why you pay only a small premium in addition to the basic premium that you will be otherwise paying for your life insurance.

Types of riders available

There are a lot of different types of riders that you might come across when buying a base life insurance policy. Some of the most common ones include:

1.    Accidental health benefits: This is the most common of all. If the policyholder passes away due to an accident during the term of the policy, an additional amount, which will be less than or equal to the sum assured will also be paid to the nominee.

2.    Critical illness benefit: This rider takes care of your medical expenses should you suffer from a critical disease. Every insurance company has a list of diseases that come under this category for its policy. If you are diagnosed with any of those diseases during your policy term, you will be paid a lump sum amount by the company.

3.    Waiver of premium: If the policyholder becomes permanently disabled, or loses income as a result of some accident or illness, the rider will help to override the need to make payment of all future premiums. Thus, premiums are waived off, while the cover continues.

4.    Guaranteed insurability: This rider will allow the insured person to purchase additional insurances at specific ages, without needing any proof of insurability, or in other words, without having to take a physical examination. This rider is useful for those who plan to buy additional insurance with their changing life circumstances, such as when they get married or have kids.

5.    Disability income: Should the policyholder become totally and permanently disabled, this rider will guarantee a monthly income from the insurance company’s side, for as long as the disability lasts.

Note that it is important to be fully aware of the inclusions and exclusions of the insurance policy rider. Check with the insurance company, not just the terms and conditions of the rider, but also the specific meaning of the words that the company uses to describe and explain various situations.

Why are riders popular?

The reason why riders are so popular is that they offer high values at low cost, and they also offer extra protection without you having to buy a second policy. Most life insurances are standardized and will not give you the freedom to modify them as per your personal needs. Riders, on the other hand, empower you with the same, letting you take control over life-changing situations.

How to find the best rider?

Though riders are nothing very complicated, insurance buyers often find it difficult to settle upon a particular rider. Firstly, a large number of riders are available, and that too at affordable prices. This makes it tough to choose the right one. Secondly, insurance agents will try to sell you as many riders as they possibly can, to make more money for themselves.

Here is a quick solution. Don’t buy riders just for the sake of it! Always ask yourself if you need that extra cover. Also, evaluate your ways of living to determine which rider you need. For instance, if you travel by road every day, or if you into a job that requires a lot of traveling, an accidental death benefit rider would be well suited for you.

Conclusion:

Riders will add extra protection, over and above your base policy. Thus, for a small price, you can avail of high value and low probability benefit. Additionally, riders cost less than the premium of your base policy. There are different riders available to suit different individual needs, which makes it important to understand your individual needs before you purchase a rider. Also, make sure that you are completely aware of the terms and conditions attached to the rider.