Buying term insurance is a critical part of your financial planning; a must-have product which you must buy irrespective of your income level and risk profile. It makes sure that your loved ones are financially secure when you are not around.
Who doesn’t like something extra which provides a value-added benefit? In a term insurance plan, there are extra coverage benefits which you can opt and make your cover more comprehensive. Do you know about such extra benefits? They are called riders.
If you are looking for a term insurance plan, you would come across the word ‘rider’ in many plans. Buying term insurance is a critical part of your financial planning; a must-have product which you must buy irrespective of your income level and risk profile. It makes sure that your loved ones are financially secure when you are not around.
Some salient features:
1. A rider can be added either when buying the term insurance plan or at any renewal. Similarly, once bought, you can opt out of the rider at any policy renewal.
2. An additional premium is payable for each rider that you choose to add to the plan
3. Riders have no maturity value. If the rider is not utilised during the term of the plan, no benefit for the rider would be paid on maturity
4. Though you can add multiple riders to your term insurance plan, the total rider premium should not be more than 30% of the base premium for the term plan
5. Premiums payable for riders are also allowed as a deduction under Section 80C or Section 80D depending on the rider selected.
6. The rider sum assured is, usually, equal to the sum assured of the base plan. However, there is a limit to the rider sum assured. If the base plan’s sum assured is higher than the rider’s coverage limit, the rider sum assured would be allowed up to the specified limit only.
Here are a few riders that are offered with a Term Plan:
Accidental Death Rider:
Under the accidental death rider, if the policyholder dies due to an accident – road, plane, industrial accident, etc. – during the policy tenure, the insurer would pay his/her family or dependent an additional sum assured for this rider. This amount is over and above the sum assured that the family would receive for the basic term life insurance policy.
Accidental Disability Rider:
This rider assures that in case of the policyholder becomes disabled due to an accident, then he/she receives the sum assured against the rider. This can be received as a lump sum after the accident or as a monthly income for a fixed tenure. That might be for two years, five years, or 10 years, depending upon the financial need of the policyholder.
In case of total or permanent disability, the entire sum assured against the rider is paid to him. And in case of partial disability, the insured gets only a partial sum assured for the rider. The percentage depends on the severity of the damage as declared by the doctor who has been treating him/her.
Critical Illness rider:
Under this critical illness rider, if a policyholder is diagnosed with one of the critical illnesses mentioned in the policy, the insurer will pay him/her the sum assured for the rider.
Terminal Illness rider:
Having this rider ensures that if the policyholder is suffering from an incurable illness, then the insurer pays the sum assured to the insured/nominee without waiting. However, this has to be confirmed by the registered medical practitioners of that specific field.
Waiver of Premium riders:
Under this rider, the future premiums are waived off if the policyholder, who is different from the life insured, dies during the term of the plan. A premium waiver rider might also waive off the coverage in case the policyholder suffers from a permanent disability during the term of the plan.
Income Benefit rider:
The income benefit rider ensures that if the policyholder dies during the policy tenure, his/her family will receive the sum assured as a monthly income for a fixed tenure instead of a lump sum. However, while buying the rider with the term insurance, the policyholder has to decide for how many years he/she wants their dependent to avail this benefit.
Having riders would make your term life insurance policy a little more expensive, but at the same time, they make the plan more comprehensive. And, in the time of need, these riders might turn out to be extremely beneficial.