How to customise your life insurance policy with riders

Life Insurance policies are basically to cover mortality risk. Some policies such as money back will also provide definite amount at periodic interval. However, one may face several other uncertain and unforeseen risks in life during which even a basic life insurance plan may not be of much help.        

A policyholder may become disabled due to an accident, thereby impacting his earning capacity. Loss of income will lead to failure of making timely / no premium payments towards the policy. This will render policy inoperative and the objective of buying the policy will not be met. Also, there may be hospital-related costs during the tenure of the policy. Invoking the base policy may not help or may not even be allowed. Also what if policyholder doesn’t want to purchase a new policy but just wants to enhance the coverage in an existing plan at a lower cost?  Read on

What is a Rider?

Riders are add-on to the basic Life Cover in a life insurance policy and are optional. They may or may not be attached to the base/primary policy. They come into play only on the occurrence of the specific event and provide a financial cover over and above the basic sum assured. Riders help in customizing the life insurance policy according to one's needs. Here are common Riders that you may use :

Waiver of premiums

This feature keeps your life insurance policy alive and waives future premiums if you become disabled in a significant way. In some policies, especially children plans, the policy will continue in event of death of premium payor (parents). This will ensure the purpose for which the policy is bought is achieved irrespective of disability/ death of premium payor.

Critical Illness Benefit

This feature typically pays a fixed sum on the diagnosis of a critical illness like heart attacks or cancer. It pays you this fixed sum regardless of the medical cost you actually incur and is hence different from medical insurance or mediclaim. You don’t have to submit hospital bills for reimbursement. Your life cover stays intact even after you have been paid the critical illness benefit and you survive the said illness. Hence the nominees will be paid full insurance amount irrespective of quantum of rider amount paid.

Accidental Death Benefit

This feature pays out a higher amount if death is due as a result of an accident. With instances of death due to accidents especially road accident growing, such rider become absolutely must as it provides same cover as base life cover but at much cheaper premiums.  

Permanent Disability Rider

It is helpful in case policyholder becomes disabled due to an accident. In most of the cases, the insurer pays a certain sum assured for the next five or ten years. So this can also be seen as Income replacement rider. Also, all future premiums are waived off by the insurance company. 

Benefits of riders

Riders are an excellent solution to increase your insurance coverage. Here are some of the key benefits of riders:

• Extra coverage: By attaching a rider to the main insurance policy, you can enjoy a comprehensive coverage. For instance, a critical illness rider pays a lump sum amount which can be used to deal with household expenses, loan EMIs and for other financial liabilities apart from medical expenses.

• Affordability: Buying a rider is much more affordable than buying a separate insurance policy. Further, there are various types of riders which one can choose as per their needs. In this way, it becomes easy to cover oneself at an affordable cost.

• Flexibility: You can add a rider to any of your insurance policy— term, ULIP, endowment, whole life and customize your policy as per your needs.

• Tax benefits: Like main life insurance policies, riders also enjoy tax benefits as per the prevailing tax rules.