Term Insurance Riders

Term Insurance Riders: All You Need To Know

A term insurance policy is a type of life insurance product designed to secure your family’s financial future in your absence. These plans offer wide coverage at very low premiums and provide the flexibility to customize basic term plans by adding the right term insurance riders at minimal premiums.

Buying a term plan with add-on riders will be beneficial for the insured person in the long run. Each insurer offers various riders in term insurance plans. Apart from the base plan benefits, you can add these optional riders to your term plan to enhance coverage for specific and predefined conditions.

Stay tuned to learn more about what term insurance riders are and the different types available in India.

What Are Term Insurance Riders?

A term rider is an optional add-on that can be added to enhance a plan’s coverage and provide additional financial support to beneficiaries beyond the base policy. Policyholders can customize their base plans with riders.

You can add riders to your base plan at nominal extra costs added to the base premium.

These term insurance riders provide additional financial support to the nominee beyond the base plan if an uncertain event occurs, such as an accidental death, disability, or diagnosis of a critical or terminal illness.

Example of a Term Insurance Rider

• Varun, aged 35, is a web designer with one child, aged 6, and a 34-year-old housewife, Leela.
• Varun, unfortunately, died in a car accident. He had a term plan of ₹1 crore with an accidental death benefit rider of ₹40 lakhs.
• After his demise, Leela received ₹1 crore as the death benefit and an additional ₹40 lakhs, as Varun’s death was due to a car accident and he had added an accidental death benefit rider.

What Are the Different Types of Term Insurance Riders in India?

Here are the term insurance riders you can add to your base plan to enhance its benefits:

1. Accidental Death Benefit Rider

   With an Accidental Death Benefit Rider, your nominee will receive enhanced coverage if the insured person dies due to an accident.

   For instance, Bhanu bought a term insurance plan with a base cover of ₹1 crore and added an accidental death benefit rider for ₹50 lakhs.

   If Bhanu had an unfortunate death due to an accident throughout the policy term, their nominee would get the death benefit of ₹1.5 Crore (₹1 crore base cover + ₹50 lakhs rider) on the death of Bhanu.

2. Accidental Total and Permanent Disability (ATPD) Rider

   The ATPD rider is an essential term insurance rider for those who work in a risky environment. It offers financial protection to the insured if they suffer a total or permanent disability due to an accident during the policy tenure. You can choose to receive the benefit as a lump-sum payment or as regular payments over 5 to 10 years to compensate for income loss due to disability.

3. Critical Illness Rider

   With a critical illness rider, you can receive a payout while you’re still alive if you are diagnosed with a listed critical illness. This payout can be used to cover medical treatment expenses such as doctor and hospital visits, prescriptions, medicines, hospital rooms, crutches, wheelchairs, etc.

4. Waiver of Premium Rider

   A waiver of premium rider is an optional add-on that waives future premiums if the insured person becomes critically ill or permanently disabled. It prevents the burden of premium payment during tough times, such as job loss due to disability or critical illness. The rider typically waives premiums after a waiting period, often 180 days.

5. Income Benefit Rider

   With an Income Benefit Rider, you can ensure your family receives a substitute for income loss due to the policyholder’s unfortunate demise. It provides the policyholder’s family with regular installments of the death benefit for a fixed period. Generally, monthly installments equal 1% of the add-on cover sum assured, payable upon the policyholder’s demise.

6. Terminal Illness Rider

   A Terminal Illness Rider is often referred to as an accelerated death benefit rider. It allows the policyholder to claim the entire or a portion of the death benefit while still alive if diagnosed with a terminal illness. To claim this benefit, you must provide doctor’s reports stating that your life expectancy is assumed to be less than 12 months.

Benefits of Term Insurance Riders

Here are some reasons why term insurance riders are important:

• Optional add-ons enhance your overall base coverage by offering protection against unforeseen circumstances.
• Buying separate policies for different needs can be expensive. However, you can customize your base plan to fit all your requirements by adding term insurance riders.
• Term insurance rider tenure cannot exceed the policy’s term.
• Term insurance riders can typically only be added while purchasing a plan.
• Premiums paid towards term insurance riders are eligible for tax benefits under Section 80C of the Income Tax Act, helping reduce the policyholder’s overall tax liability.

Who Should Opt for a Rider While Buying a Term Insurance Plan?

Anyone looking to enhance the overall base coverage of a term plan can add riders. Based on your financial goals, consider which add-on rider best suits your needs for long-term benefit.

Factors to Consider Before Buying Term Insurance Riders

Before buying term insurance riders, it is important to consider certain factors to ensure that the riders offer the necessary coverage and benefits as per the policyholder’s requirements. Here are some of the factors to consider before buying term riders:

• Personal Needs: The primary factor to consider is the policyholder’s personal needs. Evaluate your current financial situation, family size, and potential future risks.
• Affordability: Evaluate the cost of the rider and ensure it fits within your budget. The rider’s cost should not outweigh its benefits.
• Level of Coverage: Determine the level of coverage needed and ensure the rider provides it.
• Duration of Coverage: Consider the rider’s duration and ensure it aligns with your long-term goals and plans.
• Medical History: Some riders may require a medical examination or disclosure of medical history. Consider this factor before choosing a rider.
• Claim Process: Evaluate the rider’s claim process to ensure it is hassle-free and easy to follow.
• Insurance Company’s Reputation: Consider the reputation of the term insurance company and its track record of settling claims.

Conclusion

Choosing a suitable term insurance rider is as important as buying a term plan itself. Thoroughly assess your needs and future goals to opt for the one that best suits you. Compare various term insurance plans from different insurers. Knowing what your insurer offers helps you avail the best deal.