Term insurance plans give you and your family the financial protection which is required in the absence of the breadwinner. When you buy a term plan with an optimal coverage level you make sure that your family would be financially taken care of in the event of your unfortunate demise. Term plans are cheap and offer unparalleled protection. Moreover, they come with a host of riders which you can choose to enhance the coverage. Do you know what riders are and whether they are worth adding to your term plan?
What are riders?
Riders are additional coverage benefits which are available with the term and other life insurance plans. You can choose to add a rider to your basic policy by paying an additional premium. When you opt for any rider and the eventuality covered by the rider occurs, you get a benefit under your policy.
Popular riders available with term plans
Here are some common and useful riders which are usually available with all term insurance plans –
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Accidental death benefit rider
This rider covers accidental death during the term of the plan. If the insured suffers accidental death within the policy tenure, the rider sum assured and the plan’s actual sum assured are paid as death benefit. For instance, if in a term plan with a sum assured of INR 50 lakhs the accidental death benefit rider is added with a sum assured of INR 10 lakhs, in case of accidental death the total pay-out would be INR 60 lakhs.
In India more than one lakh deaths occur due to road accidents and so this rider proves useful. (Source: https://timesofindia.indiatimes.com/india/india-way-off-road-safety-targets-for-2020-road-accidents-still-kill-over-a-lakh-a-year/articleshow/65765549.cms)
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Critical illness rider
Another popular rider is the critical illness rider. As per statistics, the chance of contracting a critical illness before attaining 65 is five times more likely than death itself. (Source: http://www.businessworld.in/article/Why-Critical-Illness-Coverage-Is-Important-Today/24-10-2017-129355/). Moreover, any critical illness you face would burn a hole in your pockets whether you take the treatment or try and meet your lifestyle expenses. The rider, therefore, proves beneficial. This rider covers specific critical illnesses like cancer, first heart attack, major organ transplant, etc. If, during the policy tenure, the insured suffers from any critical illness covered by the rider, the rider sum insured is paid in lump sum. You can use the rider benefit for medical treatments or for any other financial obligations.
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Accidental disability rider
Under this rider accidental and permanent disabilities are covered, whether total or partial in nature. If the insured suffers from a total or partial disability due to an accident (like loss of limbs, eyesight, etc.), the rider sum insured is paid fully or partially depending on the disability. Moreover, the premiums payable for the remaining term of the policy are also waived.
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Terminal illness rider
This rider, though seems similar to critical illness rider, is actually different. Under this rider, if the insured suffers from an ailment which is terminal in nature, a portion of the base sum assured is paid during the term of the policy after the diagnosis of the illness. Thereafter, the premiums are waived off and when the insured dies, the remaining sum assured is paid.
These are the common riders which are available with term insurance plans. In fact, in some plans, one or two of these riders are inbuilt in the plan itself eliminating the need to opt for the rider. Such plans give enhanced coverage due to the inbuilt additional rider benefit.
Benefits of riders
- They increase the coverage of a basic term plan
- They have very low premiums which makes them affordable and cost-effective
- You can claim a higher tax deduction by paying an additional premium for the rider
- Riders give you peace of mind when you know that you are covered not only against death but against other contingencies too
Are riders worth buying with term plans?
The coverage which riders offer can also be availed under standalone insurance plans. There are personal accident plans which cover accidental death and disabilities and critical illness health plans which cover critical illnesses. These standalone plans offer the same coverage benefit offered by riders but they score over riders in the following aspects –
- Standalone plans offer wider coverage. Critical illness plans cover more illnesses compared to riders. Similarly, under personal accident insurance, you also get coverage against temporary disabilities as well as a lump sum benefit for children’s education, loss of employment, etc.
- You can customize standalone plans as per your coverage requirements. Riders only cover the insured and the sum assured is also limited. In standalone plans, you can opt for higher coverage levels and also include your family members under the cover.
- The tax deduction is increased as the premiums are higher for standalone plans.
Given these benefits, you can consider standalone plans to avail higher coverage. If you want a basic coverage at lower cost, riders are good but for more detailed and comprehensive coverage, standalone plans make more sense even if the premium is slightly higher. Given the increased incidence of illnesses and accidents, having detailed coverage is more prudent. However, you should judge your requirements and then make a choice.
