Having financial safety is very important for an individual, and life insurance is one of the most important tools which can help contribute towards achieving that. Anyone who financially supports a family member (dependent) automatically becomes an ideal candidate for purchasing a life insurance policy, the basic purpose of which is to provide financial protection to your loved ones in case of your sudden demise.
Speaking of life insurance, it is something which varies depending on the individual’s needs. Different individuals have differing financial situations and requirements, which further affect their life insurance needs as well. The amount of cover that Mr. A needs, may be drastically different from what Mr. B may need, considering that Mr. A has far more in assets than Mr. B. One of the most important aspect which can help enhance the value that a life insurance policy provides to the policyholder, is, the add-on rider.
Riders can be simply defined as coverage enhancements which one can opt to take over and above their base life insurance plan, to increase the scope of its coverage. Add-on riders can be taken at the time of purchasing a policy, or even at the time of renewal. The premiums charged for these riders are over and above the base plan premium.
Importance of Having an Add-on Rider
- < Allow for policy customisation – If you have aterm life insurance plan which provides basic coverage against the risk of death, having an add-on rider with the plan allows you to customize the plan. With the right rider, you can get enhanced coverage against a potential risk which may not be covered under your policy.
- Make insurance more economical – As has been mentioned in the previous point, having an add-on rider eliminates the need to purchase an additional life insurance policy. The resultant benefit which one gets is not having to pay additional premiums towards a separate life insurance policy. The premiums charged for an add-on rider are significantly lower as compared to the premiums payable for a fully functional life insurance plan. Therefore, having an add-on also saves you tremendous amounts of money as well, which is always a good thing.
- Eliminates the need for an additional policy – There are many risks which life insurance policies provide cover against such as cover against permanent disability, total/partial temporary disability, loss of income, accidental death, critical illness, and many more. However, rarely would you find an instance where a single policy provides cover against multiple risks. Which is where the add-ons are important. You can attach a rider to your base plan to get additional coverage, without having to purchase another policy to get the same coverage.
Most Popular Add-on Riders Available With Life Insurance
Under life insurance, policyholders have plenty to choose from in terms of add-on riders to enhance the coverage provided under their base plan. Here are some of the most popular add-on riders which are commonly offered by insurers.
Accelerated Death Benefit Rider
- If the insured policyholder has been diagnosed and is undergoing treatment for a life-threatening illness, the accelerated death benefit rider will provide them with a fixed percentage of the sum assured.
- This rider can be of invaluable financial help especially at times when the policyholder’s family has to shell out a majority of their savings towards getting adequate treatment for the insured.
Accidental Death Benefit Rider
- This rider will provide an additional amount of sum assured (rider sum assured) if the policyholder happens to pass away following an accident.
- The amount of the rider sum assured can differ from provider to provider, and is determined based on the base plan sum assured.
- Some insurers may limit the maximum amount that can be provided as rider sum assured.
- The premium rider stays unchanged for the complete policy period.
- Certain life insurance providers may not offer this rider with a term plan, so check before purchasing.
Critical Illness Benefit Rider
- As the name suggests, the critical illness benefit rider is offered when the policyholder is diagnosed with any of the listed critical illness. Following the diagnosis, the rider will provide the insured with a lump sum amount to take care of medical expenses involved in treatment of said illness.
- The critical illness benefit rider usually provides cover for a number of critical illnesses such as cancer, stroke, heart attack, paralysis, kidney failure, coronary artery bypass graft surgery, major organ transplant, etc.
- Based on the terms and conditions stated, the policy coverage may or may not continue after the diagnosis of the critical illness.
- In certain cases, after the critical illness benefit rider has been paid out, the policy cover amount may be reduced by the amount rider benefit sum assured.
- Before you opt for this rider, make sure you understand the terms and conditions of the rider in full and find out what it covers.
Accidental Disability Benefit Rider
- The accidental disability rider kicks into action in case the insured policyholder has been rendered permanently or partially disabled following an accident.
- This rider acts as a source of income for the insured and their family following the accident, as it provides them with a fixed amount, which is a specific percentage of the sum assured, at regular intervals, for a fixed number of years.
- The accidental disability rider is usually offered along with the accidental death rider.
Income Benefit Rider
- The income benefit rider is especially useful in cases where the policyholder wants to ensure that the short and long-term needs of their loved ones are taken care of.
- Under the income benefit rider, the beneficiary is entitled to receive an additional amount of income per year, for a fixed number of years, in addition to the sum assured provided under the base plan.
Waiver of Premium Rider
- This rider basically waives off future policy premiums in case the policyholder has become financially incapacitated to pay policy premiums due to an emergency such as being diagnosed with a critical illness, due to loss of income, or due to a an accident-led disability.
- The biggest advantage of this rider is that the policy continues to provide cover, even after the premiums have been waived.
- If the policyholder has not opted for this cover, but they are, due to an emergency, unable to pay future policy premiums, then their policy will lapse after the grace period is over, and they will not be eligible to receive any death benefit.
If you are looking to enhance the protection which your life insurance plan currently provides, getting an add-on rider is the ideal option. With many insurers now offering a wide range of add-on covers over insurance plans, you have plenty of options to choose from.