When financially planning for the future, it is possible to take a number of life goals and changing priorities into account. However, what always remain unaccountable are the uncertainties of life. Medical emergencies, loss of employment and other such mishappenings can disrupt our future plans and seriously affect our financial health.
That is why life insurance should be an essential component of every person and family’s investment portfolio. In particular, term plans are increasingly emerging as a popular investment option. However, in order to truly prepare for life’s uncertainties, even your term plan can use a few upgrades in coverage to help you stay secure for years to come. These upgrades to your term plan are known as term insurance riders and can help greatly enhance your coverage. Here is a closer, more detailed look at the topic:
What is Term Insurance?
Let us begin by reviewing how term insurance is understood and why term plans are overall beneficial. Term plans are a type of life insurance product, whereby financial coverage is offered to the policyholder for a fixed period of time i.e. ‘Term’. In case the insured passes away during this term, his or her beneficiaries are eligible to receive a death benefit.
One of the greatest benefits offered by term plans is that they are much more economical than most traditional life insurance policies. As insurance products, they also offer far more flexibility and freedom to the policyholder. Much of this flexibility can be achieved by incorporating one or more of the various riders offered by the insurer into your term plan
The purpose of a term plan is to provide financial coverage to your beneficiaries in the unfortunate event of your demise. In its simplest form, term plans achieve this by giving out a death benefit to the nominees of the insured. However, these benefits can be further enhanced if the policyholder opts for certain attachments or amendments to his/her term plan. Such attachments are known as term insurance riders.
Riders allow you to customize your term plan according to your needs as well as those of your family. Some of the most commonly added riders to term plans are Accidental Death Rider, Child Support Benefit Rider, Critical Illness Rider and Accidental Total and Permanent Disability Rider.
Benefits of Term Insurance Riders
A rider is typically an add-on to the conventional life insurance policy. It is designed to provide coverage over and above that of the primary policy, at an additional premium. It is an effective way to maximize benefits of a life insurance policy and tailor it to fit your needs
Rider benefits come into effect on the occurrence of the stipulated event (as mentioned in the policy) so that you get financial cover on top of the basic sum assured.
What are the different types of riders?
There are a range of riders and some of the most common riders are:
1. Accidental Death and Permanent Disability Benefit Rider
Accidents, in some cases, can lead to permanent disability or even premature death. Such a situation can hurt a family’s finances and potentially derail every life goal.
- Therefore, in order to safeguard financial well-being, one can consider an additional cover – besides the base death benefit that a policy offers there would be additional benefit payable upon death or permanent disability resulting from an accident.
2. Critical Illness Rider
With this rider, the insured would get a pay-outon being diagnosed with a critical illness. Generally, such illnesses include kidney failure, coronary artery bypass surgery (CABG), cancer, heart attack and paralytic stroke, among others.
- However, this list varies across insurers. Moreover, unlike a mediclaim, the insured need not furnish any treatment bill as the amount would be paid out, regardless of the expenses incurred towards medical care..
3. Term Rider
A term rider promises an extra amount to the nominee, usually equivalent to the base sum assured, on death of the life insured.
4. Waiver of Premium (WoP) Rider
A permanent disability can impair one’s earning abilities. This can affect a family’s financial well-being. In such a situation, the inability to pay life insurance premiums might result in a policy lapse.
- It is here that a Waiver of Premium rider can come in handy, wherein the insurer would waive off all future premiums payable towards the base plan. However, policy benefits would continue as they were.
5. Family Income Benefit Rider
This rider serves to provide a steady stream of income to the family upon death (or total disability) of the life insured.
- It is advisable that at the time of purchase, you decide on the exact number of years you’d want your family to receive the additional income benefit.
6. Surgical Assistance Benefit
- This rider offers financial assistance in case of a medical emergency that might require surgical intervention. However, if more than one surgery is performed in one confinement, the total pay-out should not exceed the amount of coverage from this rider.
How to choose the most effective rider?
While all the riders serve specific purposes, it is essential that your choice depends on a thorough evaluation of your needs.
For instance, a Critical Illness Rider can assume importance, considering sum assured is often equal to the base coverage and pay-outs are flexible. Moreover, if your family has a history of critical illnesses, you should certainly opt for this rider.
That’s because it can help you meet high treatment costs of critical ailments.
Importantly, if you are the sole bread-winner of your family, it is advisable you consider a Critical Illness Rider and an Accidental Death and Permanent Disability Benefit Rider.
That’s because coverage, in most cases, kicks into effect upon diagnosis (of the condition) or sustaining the disability. This way, the primary objective of income replacement is taken care of.
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