The main reason behind opting for a life insurance policy is to provide cover for one’s family in the unfortunate events. This policy provides a lump sum amount to compensate for the loss of income and gives financial support to the family of the bereaved. However, life is unpredictable and despite taking the best of measures, one cannot plan for unforeseen risks. Merely buying a life insurance policy does not cover for several other uncertainties like the policyholder becomes disabled and being unable to pay the premiums on time. There may be other expenditures like huge hospital bills that affect their earning capacity. Therefore, life insurance riders come handy in these situations as they enhance the coverage of the existing plan at a relatively lower cost.
Life insurance riders are additional optional benefits that can be attached to the base policy of the policyholder. When attached to the plan, they only play a part if a specific event occurs and provide a financial cover over and above the basic sum assured. Riders can be chosen for any life insurance plan; be it a term plan, an endowment plan or a unit-linked insurance plan. They can be customized to make the life insurance plan suitable as per one's needs. It is important for policyholders to know about some of the most commonly available riders that they can opt for in their policies. Let’s have a look at a few important riders that policyholders should take into consideration.
- Accidental death and permanent disability benefit rider - In spite of being careful all the time, accidents can still take place at any time and be the reason behind death or permanent disability of the policyholder. Along with the emotional trauma, it can severely disrupt one’s finances due to sudden loss of income. In such troubled times having an accidental death and disability benefit rider in one’s life insurance plan saves the family from a financial crunch. An additional sum assured is paid to the policyholder’s family if he/she passes away due to the accident. If the policyholder is rendered partially or permanently disabled from an accident, the disability rider provides pay-outs over the basic sum assured for the necessary medical treatments.
- Critical illness rider - Critical ailments such as cancer, heart attack and cardiovascular problems, organ transplants, stroke, kidney failure and other such grave health conditions come unannounced and require expensive treatments. A critical illness rider is a valuable addition in one’s life insurance policy when the policyholder is diagnosed with a specified critical illness as it disburses the pay-out amount and provides some relief from anxieties about high medical bills and proper line of treatment. The periodic pay-outs or lump sum amounts above the sum assured reassures the family of the insured to stay financially stable in during such serious illnesses. Some insurance providers offer variations of this rider through hospitalization care and surgical care riders. One should definitely opt for such riders if they have a history of critical illness in the family.
- Waiver of premium rider - This life insurance rider offers benefits by waiving off the future premiums when the policyholder is unable to pay the same due to temporary or permanent disability or when diagnosed with a critical illness. Due to a partial or total disability of the policyholder or during unexpected circumstances, there is loss of income and inability to pay the premiums timely. By opting for this rider, policyholders can counter the unforeseen situation and prevent their policy from being ceased due to inability to pay due premiums. By activating this rider, policyholders can have future premiums waived off and the life cover still continues to keep the family safe against other potential financial hardships.
Saving on taxes is one of the benefits of adding riders to one’s life insurance policy. The premium paid towards the critical illness rider or other health-related rider qualifies for tax benefits under section 80 D of the Income Tax Act while the accident and disability benefit rider is eligible for tax benefits under section 80 C. However, it is important to note that the total rider premium for all riders added in the policy together cannot exceed 30 percent of the base plan’s premium.
While life insurance protects the family from a financial crisis in the absence of the insured, life insurance policy riders provide the benefit of customizing the coverage as per every policyholder’s budget and saves the extra cost of buying separate policies for different needs.
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