Riders are add-on benefits that can be purchased along with the basic life insurance policy that enhances or adds some benefits which might not be present in the original plan. Riders are optional components that can be mixed and matched with the basic policy based on one’s preferences at an additional cost. It helps the insurance companies to offer flexibility and the option of customisation in the policy to customers. With a host of riders, the customer can now choose to effectively tailor the plan as per his/ her requirements. Since these riders come at an additional cost, the customer should carefully evaluate the benefits while taking on these add-ons benefits.
Some of the riders being offered by the life insurance companies in India are as mentioned below:
Increased Death Benefit
This rider benefit is for customers who need extra life insurance protection along with the base cover as it provides the option to increase the risk cover for a limited period and up to a certain maximum amount as defined. With a little extra premium, which is a nominal cost, the policyholder can increase his life cover as compared to taking another policy of similar life cover with a higher premium.
For example - If a customer, Raj, requires Rs. 20 lakhs of life cover, and he opts for Rs. 15 lakhs of cover in the base plan, then the remaining Rs. 5 lakhs of cover can be obtained by taking a Term Rider; rather than taking another policy of Rs. 5 lakhs as it would be much more expensive a proposition.
Accidental Death Benefit
This rider benefit is for customers who need extra accidental protection along with the base cover as it provides the option to enhance the risk cover against accidents for a limited period, up to a certain maximum amount as defined. People who travel a lot or drive themselves are more prone to accidents than others and hence they would have a greater requirement. It covers the life insured against accidents that might result in death and it helps the family to meet any unforeseen expenses or liabilities on account of the accidental death of the life insured. With a little extra premium the policyholder can opt for an increased accidental death cover, over and above the base cover at a nominal cost as compared to taking another policy of similar cover.
For example - If the customer, Raj, has taken a basic policy which offers a sum assured of Rs. 10 lakhs and has taken an accidental death benefit rider of an additional Rs. 10 lakhs. In the event of death of the policy holder due to an accident during the tenure of the policy, the nominee would get Rs. 20 lakhs as the death benefit.
Permanent Disability Benefits
This rider is for the benefit of people who survive in an accident but become disabled, totally or partly, permanently or temporarily or a part of his body is severed or dismembered from his body. Thus, depending on the disability of the body or the part which has been severed, a part or whole rider sum assured is paid to the customer as a survival benefit, subject to terms and conditions. It primarily provides for the medical expenses and the loss in income due to the disability or the dismemberment caused due to the accident. It is for the survival benefit of the customer.
For example - The customer, Raj, has taken a base plan for Rs 15 lakhs with an accidental death benefit of Rs 5 lakhs and meets with an accident but survives with a permanent disability of his foot. In that case, he would not get any money if he had not applied for accidental disability or dismemberment rider.
The above mentioned 2 riders are also available as a single rider called Accidental Death and Permanent Disability Benefit (ADDB) with some insurance companies
Waiver of Premium Benefit
This rider works two folds - it is for the benefit of the life insured in case of permanent disability or for the family in case of death of the life insured. In case of permanent disability of the insured person due to sickness or injury, the premiums are waived off till the person is fit and employed again. This rider works well particularly in child plans. In case of death of the insured person, the premiums are not only waived off for the rest of the tenure, but the company might also pay the future premiums to ensure that the benefit planned for the child is not hampered at the maturity of the policy.
For example - The customer, Raj, dies leaving his child behind, then the premium for the policy will be paid by the company for the rest of the tenure, so that when the policy matures, the child gets the planned maturity benefit for his or her future.
Critical Illness or Dreaded Diseases benefit
This rider is added to a life insurance policy to protect the insured in the event of suffering a critical illness. Generally, the sum assured for critical illness is paid upon diagnosis of the illness. Thus it is a survival benefit and not a death benefit. This amount is paid to the life insured to cover the medical expenses incurred to recover from a critical illness. Since critical illness treatment can be expensive, this cover can be very useful.
The critical illnesses covered vary from insurer to insurer. However, most insurers cover cancer, coronary artery bypass, heart attack, kidney/ renal failure, major organ transplant and paralytic stroke. Some insurers terminate this rider once a claim is paid. The basic difference between a critical illness benefit and a medical insurance policy is that under the critical illness benefit the policy holder gets an amount equal to the sum assured irrespective of the medical expenses on diagnosis of the critical illness while under a medical insurance policy, the policy holder receives a reimbursement on producing the bills which is limited to the extent of amount medical expenses incurred.
Guaranteed increases in cover at specified periods
This rider gives the guarantee of increase in life cover without any medical examination or major documentation issues. It guarantees an automatic increase of life cover during the term of the plan at specific periods. This rider is also called Increasing Term Rider, as the cover of the life insured increases systematically at specific periods as already mentioned on the policy details.
For example, the customer Raj purchases a life insurance with base cover of Rs. 10 lakhs which increases every year by 5% till it reaches Rs. 20 lakhs. Thus if Raj dies after 10 years, then the death benefit received by the family will be Rs. 10 lakhs (under the base plan) and Rs. 5 lakhs (because of the rider).
Cover to continue beyond maturity age for same SA or higher SA
This rider gives the benefit to continue or increase the life cover beyond the maturity of the policy. It is useful for the customer and his family for the tenure beyond the completion of the policy at a nominal extra cost. This rider provides for the comfort of the life cover to the family with changing life circumstances beyond the term of the policy.
For example, the customer, Raj and his family would get the benefit of Rs. 15 lakhs of the base sum assured even beyond the completion of 30 years of the plan under this rider.
Option to increase cover within specified limits or dates
This rider provides for the option to increase cover of the life insured during the term of the policy, subject to specified limits or certain specific dates. It provides for the right to purchase additional insurance at different stages of the policy, depending on the policy. This rider is useful if there is a need to buy additional insurance to keep pace with changing life circumstances and increased cost of living - like when the customer gets married or has children.
For example, the customer, Raj has the benefit of increasing his life cover till a certain extent when he gets married and again when he has children. It is also possible at specific periods during the term of the plan without medical examination or much documentation.
Hence, riders are the additional benefits that can be bought and added to a basic insurance policy. These options allow the customer to increase his insurance coverage or limit the coverage set down by the policy. Two or more riders can be blended or mixed, for an additional cost, according to your present and future insurance needs. However, buying a rider means paying an extra premium for this supplementary benefit. Generally, this premium is low because minimal underwriting is required.