Your Kickstart Guide to Choose Life Insurance Riders and Secure Your Family

Choosing a right life insurance plan is one of the crucial decisions you make.

After all, you don’t want to regret a wrong decision. Thus, you must take time and expert's advice before buying a life insurance plan.

It is important to opt for the right life coverage. And it is equally important to know about the optional features - Riders.

Riders are optional features of life insurance policies, which enhances the base plan coverage at an affordable price.

Moreover, the right choice of life insurance riders would help your family at the time of claim.

Here’s quick question to you: What does a fast working charger and life insurance riders have in common?

Don’t take a wild guess.

Instead, read on to unmask the similarities. And know the right type of life insurance riders to secure family.

What is Life Insurance?

Life insurance provides life coverage, which provides complete protection against the risk of death.

Objective of a Life Insurance Plan

The objective of life insurance is to provide financial security in case the breadwinner passes away. It is a risk coverage against the untimely death of the breadwinner, which would leave the dependents in a financially stable situation.

In such an unfortunate event,without life insurance the breadwinner's family could be in financial crisis - with no cash flow.

However, if you have a life insurance plan, in such eventualities, the insurance company pays the life coverage to the nominee/beneficiary. This helps the insured’s family to become financially stable without compromising on their lifestyle.

Moreover, there are types of life insurance policies which provides an opportunity of savings, investment, retirement planning and much more.

The life coverage could be used for various purposes:

• Household monthly expenses
• For child’s education
• To pay off any house loan or debts
• To build funds for retirement
• To build corpus for child’s marriage

Now, that you have understood the importance of life insurance and how it works, it’s time to understand the riders.

Life Insurance Riders

Riders are the paid features that you can add to expand the scope of your life insurance plan’s base coverage.

Here's how:

A permanent disability, or suffering from a critical illness may leave you out of work. A vanilla life insurance plan does not cover the breadwinner’s loss of income due to disability or critical illness. Moreover, how you are going to cover up the household expenses.

If you are suffering from a permanent disability, or from a critical illness, this may leave you out of work. A vanilla life insurance plan won’t cover the loss of income due to disability or critical illness.

But, did you ever imagine how will you manage or cover up the household expenses?

Moreover, these days, it is quite common that people at 30 get a sever stroke, which forces them to leave work because of stress and hectic schedule. Or may suffer critical illness.

As a matter of fact, the cost for the treatment of any critical illness, such as heart attack, cancer and alike shoots the sky; which may leave the family in debts.

For instance, the cost of an anti-cancer drug may cost anywhere between Rs. 72,000 to Rs. 76,000 per dose.

This is where life insurance riders come to your rescue.

You can cover these unforeseen eventualities with rider sum assured benefits. By adding riders to your life insurance, you can expand the policy's coverage at very low premiums.

Now, I will help you with the different types of Life Insurance Riders through this article. Further, how to choose the right type of riders when buying life insurance.

8 Most Common Life Insurance Riders

1. Accidental Death Benefit Rider

In case of an accidental death of the life insured, the insurance company will pay the sum assured plus the rider benefit to the nominee.

In many incidents, an accident may not directly lead to “on the spot death,” and thus, most of the companies include a duration after the occurrence of the accident to extend the given cover. For instance, if the insured dies within 180 days of the occurrence of an accident, the nominee still gets the sum assured money. It is important to see such details before choosing riders and also compare from different insurers.

Who should opt for an Accidental Death Benefit Rider?

As this cannot be predicted before the incident, this rider can be taken by everyone. However, this is a must have rider -

• For someone who commutes and travels through vehicles – car, bike, commercial vehicle, public transport, train, etc.
• For someone who frequently travels through flights for business, work and travel purpose
• If the job involves physical work in a manufacturing industry or on-site civil work

2. Accidental Total and Permanent Disability Rider

If due to the accident the life insured suffers total permanent disability - losing legs and arms, consequentially, forcing one to leave work, this rider will help with the cash flow.

In such an unfortunate event, the insurance company gives the rider benefit to the life insured.

The rider benefit varies from insurer to insurer and also on the sum assured of the base plan. Some companies pay a percentage of the rider benefit as a regular monthly income for 5 to 10 years. If the life insured dies during the tenure after suffering the disability, the nominee would get the outstanding sum assured or as the rider condition dictates.

Most of the time this rider is attached with Accidental Death Benefit Rider.

Who should opt for an Accidental Total and Permanent Disability Rider?

As this cannot be predicted before the incident, this rider can be taken by everyone. However, this is a must have rider -

• For someone, who commutes and travels through vehicles – car, bike, commercial vehicle, public transport, train, etc.
• For someone, who frequently travel through flights for business, work and travel purpose
• For someone, whose job involves physical work in a manufacturing industry or on-site civil work

3. Critical Illness Rider

It covers major critical illnesses like heart attack, cancer, stroke, kidney failure, paralysis, coma, etc. It is important to check the list of illnesses covered as it varies for different companies.

Why should you opt for this rider?

Because the insurance company pays the rider benefit once the critical illness is diagnosed.

Any of the listed Critical Illnesses may not lead to death, immediately. But, that could leave the insured out of work and break in the income flow. With the help of this rider, the life insured is compensated immediately. Thus, the money can be used for monthly expenses and also for medical treatments.

Some insurance companies pay 100% of the sum assured on diagnosis. It is however paid if the life insured survives the waiting period of 30 days after the date of diagnosis.

Who should opt for a Critical Illness Rider?

As these are unexpected illnesses and cannot be predicted with medical history, this rider can be taken by everyone. However, this is a must have rider -

• For top-level executives with too much work stress
• For someone, who smokes frequently
• For someone, with unhealthy lifestyle

4. Waiver of Premium

In case of a vanilla life insurance plan, if the life insured suffers any disability because of which he/she is unable to pay any future premiums, the policy terminates.

In which case, you wouldn't get any compensation. Then, how will you manage to pay for the life cover and your monthly household expenses?

In such a circumstance, having a “Waiver of Premiums” rider will be of a benefit. Here, all your future premiums will be waived off, and the policy will continue to be in existence.

It may also be the case if the proposer is different than the insured. If the future premiums cannot be paid because of the accidental disability or death of the proposer, then the premiums for the base policy and riders will be exempted, but your policy will continue.

Who should opt for a Waiver of Premium Rider?

Generally, this rider may be available along with Accidental Total and Permanent Disability Rider and Critical Illness. If not, then one has to opt for it separately.

As this cannot be predicted before the incident, this rider can be taken by everyone. However, this is a must have rider -

• For someone, who commutes and travels through vehicles – car, bike, commercial vehicle, public transport, train, etc.
• For someone, who travels frequently through flights for business, work and travel purpose
• For someone, whose job involves physical work in manufacturing industry or on-site civil work

5. Accelerated Death Benefit Rider

In a case where the life insured is diagnosed with a terminal illness, such as Cancer, Leukemia. AIDS, Ebola, etc. which shortens the lifespan, this rider is the rescuer.

In such a case where the life insured is diagnosed with a terminal illness, the insurance company pays a part of the sum assured in advance. This can be used by the insured for the treatment. This one-time lump sum payout on diagnosis can be set at the time of purchase.

The rest of the money is paid to the family after the passing away of the insured so that the family stays financially secured.

Who should opt for an Accelerated Death Benefit Rider?

• One must do a serious self-analysis of the environment where one is living and the kind of lifestyle. Then, one may decide to opt or not. However, these are totally, unpredictable.

6. Term Rider

Offers lumpsum or monthly income to the nominee in the event of life assured's death. The rider benefit can be equal to the base plan coverage or a pre-determined value defined in the life insurance policy.

Who should opt for a Term Rider?

• Someone who wish to leave behind an enormous coverage amount

7. Hospital Cash Rider

A fixed benefit per day of hospitalization is paid in case of hospitalization. The benefit amount, minimum and maximum sum assured, terms and condition differs from insurer to insurer.

Who should opt for a Hospital Cash Rider?

• Whoever wish to cover hospital expenses in case of eventualities

8. Surgical Care Rider

If you are undergoing a surgery in India which can't be avoided, a lump sum benefit will be paid. The benefit may differ from one type of surgery to other. The coverage varies for a minor and major surgery cases.

Who should opt for a Surgical Care Rider?

• Whoever wish to cover surgical expenses in case of eventualities

Tax Benefits for Life Insurance Riders

One can avail tax benefits for the life insurance riders.

• All the premiums paid towards the Critical Illness Benefit Rider or any other health-related rider are tax exempted under Sec 80D of Income Tax Act, 1961.

• All the premium paid towards the accidental death benefit rider, accidental total and permanent disability benefit rider are tax exempted under Sec 80C of Income Tax Act, 1961.

Finally, Do You Need Life Insurance Riders?

I asked you a question. I suppose time has come to tell you what is common between a fast working charger, and life insurance riders.

Let’s say you are in a hurry and your phone’s battery is about to die. Would your regular charger be of any help?

Maybe.

Unless and until you don’t have any other option, except to wait for your phone to get charged. Or have a power bank.

But, what if someone hands over a charger that works really faster than usual, at that very moment to you?

I know how it would be like - a BIG sigh-of-relief.

You can use a regular one. But at that very moment, what you need is a fast working charger - when you need it, you need it.

The same it is with life insurance riders. Like a fast working charger, riders are optional. A fast working charger charges the battery faster by increasing the charging power; the same way riders increase the power of your life insurance plan.

You can simply buy a vanilla life insurance without riders.

But at times – God forbid, if you suffer a permanent disability or critical illness, how would your family tackle that situation – monthly expenses, child’s education, marriage, home loans and so forth?

In such cases, where you need a complete protection for unforeseen eventualities, riders are the one to count on.

Things to Keep in Mind about Life Insurance Riders

In-built riders - Some insurers offer plans with in-built riders at no cost. Don't forget to check-out such in-built featured plans at the time of comparing life insurance plans.

Buying riders - Most insurance company offers buying of riders only at the time of inception of policy or on policy anniversary. This again varies from insurer to insurer. It is therefore suggested to plan strategically before planning a life insurance plan and riders (if any). Because once the policy is issued, you may not be allowed to opt for riders.

Canceling riders - You don't have to worry on cancelling the riders. You can cancel this optional featured riders any time during your policy tenure.

Rider premium payment - Same as policy premium term and mode.

Life Insurance Riders - Take Away

Riders are optional, but the power with which it comes is what matters. I hope this kickstart guide to choosing the life insurance riders will help you to decide the right type of riders and secure your family.

Here’s a takeaway, if you have dependents counting on you for their livelihood and other life activities, it goes without a saying that you need a life insurance with riders. You must choose the right riders as per your requirements and conditions.

If you have any related concerns, be free to ask us, and we guarantee you to help you in every possible way.

Drop a comment and share your concerns.

Recommended Read: How to Choose Term Insurance Riders Effectively