Accident, Critical Illness, Disability are some of the major incident which can destabilized any family living. The financial implications of the cost one have to bear can disturb your financial goals. Hence there is always a need to cover yourself from such emergencies.
Although, general insurance companies now cover these illnesses/injuries through specific policies, life insurance companies have been offering the benefits from a long time. Riders, as they are known, are additional benefits which a policy holder avails by adding them in basic policy. The company charges extra premium on the basis of cover taken. If diagnosed, the company pays the benefit amount to the policy holder/beneficiary.
The riders in life insurance policies are not reimbursements but a defined lump sum payment, irrespective of the actual cost. Once the claim is settled, the rider benefit ceases and basic policy continues. In no circumstances the rider can be added again in the same policy. However, since a rider is attached to the basic policy the term of rider is same as the policy term.
These riders, offered by life insurance companies, may be availed at the time of purchasing the basic insurance plan at a very nominal cost. However,the maximum amount of benefit cannot exceed the basic plan Sum Assured. Also as per IRDA guidelines, the total premium in all riders cannot exceed 30% of basic plan premium.
So what are these riders and how does they benefit you:
1. Term Rider: If the life assured dies during the term of the policy, the additional death benefit amount is paid to the beneficiary or nominee as stated in the policy. Do remember, this benefit is over and above the basic insurance policy benefit but comes with a maximum limit. For e.g. the rider amount does not exceed Rs 10 lakh in some companies. In comparison, this rider is similar to a term insurance policy where a lump sum is paid to the family, if the policyholder dies during the term. Since companies have created different categories like smoker, non-smoker and preferred, the premium rate will vary across these. However, like basic insurance plan, the riders too have some exclusion which is mentioned in terms and conditions of the policy.
2. Accidental Benefit Rider: If the policyholder dies due to an accident, the company pays the benefit Sum Assured to the beneficiary on proof of the same. Like term rider, this too have a maximum limit irrespective of basic SA. For e.g. some companies lay a limit of Rs 10 lakh even if the SA of basic plan reaches Rs 1.0 cr.
3. Disability Rider: In situation where the life assured is disabled due to accident/injury, there might be a loss of income. To cover such mishappenings, life insurance companies offer disability rider. Here, two types of disabilities are covered –temporary and permanent. Permanent Disability occurs when there is inability to work from permanent loss of use of any two limbs or total & permanent loss of sight. Also covered is injuries that leads to permanently loss of occupation from the date of accident onwards. Contrary to this, temporary disabilities will happen due to loss of one limb or one sight and there might not be a loss of income.
This rider also has a limit, which varies across all companies.
4. Critical Illness Benefit Rider: Sometimes medical emergencies arise due to illnesses like heart attack, kidney failure, stroke etc. To cover up such incidents, a life insurance company provides financial support through Critical Illness Rider. Once life insured is diagonized with any of the illnesses listed in terms of the policy, the benefit amount is paid to the insured family to reduce the financial burden. After CI is paid, in some Inurance Policies, the basic Sum Assured and all benefits which are based on SA gets reduced by the proportion which CI rider bears to basic SA. Do note that unlike CI rider in health insurance companies, this is a once in lifetime payment i.e. once claim is settled the rider ceases and cannot be again added to the basic policy.
5. Income Benefit Rider: Apart from the basic riders LI companies in some policies offer riders which are crucial in meeting emergencies. Income benefit rider is fairly common in child insurance policies. Under this rider, when there is unfortunate demise of policy holder the life insurance company pays all future policy premium while the initial policy benefit continues.hence, in a children policy this rider helps in meeting expenses as planned while taking the policy.
What is not included in Riders?
One need to understand that there is specific exclusion in each of these riders which can lead to rejection of claim. Hence, it’s necessary that you make yourself aware of certain illnesses/injuries which are not included. For e.g CI rider do not cover illnesses due to any pre-existing medical condition if not disclosed, alcohol or drinking, HIV or AIDS etc. Similarly for other riders Self infected injuries, Influence of drugs, liquor, breach of law, war, motor race etc. are permanently excluded.
Although riders can add value to your life insurance policy, you should compare the detail benefits before you take a decision to add them.
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