A term life insurance is a very basic product, but needless to say, it is extremely essential. If a policyholder dies during the policy tenure, it takes care of the financial needs of his/her family. And adding the right riders with your term plan makes it more comprehensive providing the extra firepower to it.
In this blog, we will talk about a few popular riders that are offered with term plans. It will help you figure out which riders you should add with your term life insurance plan as per your need.
Before we talk about the different riders that come with a term plan, let’s understand what a rider is.
By adding a rider with your insurance – life, health, home, car, etc – you can avail extra benefit with your basic insurance plan. For example, you can take a third-party cover as a rider with your car insurance; a maternity cover as a rider with your health insurance; an income benefit rider with term life insurance.
Some riders are also available as stand-alone policies. For example, critical illness is available as a stand-alone policy and also as riders with term and health insurance policies. And some of the riders can be availed as add-ons with your insurance.
Premium amounts for riders depend on different aspects like – the sum assured, age of the policyholder, policy term selected, payment term,etc.
Here are the 6 riders that are offered with a term plan
- Accidental death rider:
Under the accidental death rider, if the policyholder dies due to an accident – road, plane, industrial accident, etc – during the policy tenure, the insurer would pay his/her family or dependent an additional sum assured for this rider. This amount is over and above the sum assured that the family would receive for the basic term life insurance policy.
For example, let’s assume you have a Rs 1 crore term life insurance plan, and you have an accidental death benefit rider with it. The coverage for the same is Rs 10 lakh. Now, if you die due to an accident during the policy tenure, your family will receive Rs 1 crore sum assured for the term plan and Rs 10 lakh for the accidental death rider.
2 Accidental disability rider:
This rider assures that in case of the policyholder becomes disabled due to an accident, then he/she receives the sum assured against the rider. This can be received as a lump sum after the accident or as a monthly income for a fixed tenure. That might be for two years, five years, or 10 years, depending upon the financial need of the policyholder.
Now, in case of total or permanent disability, i.e. when the policyholder is unable to work or fend for himself, the entire sum assured against the rider is paid to him. In case of partial disability, that is when the policyholder is disabled but is able to work, for example, maybe he/she loses a finger, the insured gets only a partial sum assured for the rider. The percentage depends on the severity of the damage as declared by the doctor who has been treating him/her.
- Critical illness rider:
Under this critical illness rider, if a policyholder is diagnosed with one of the critical illnesses mentioned in the policy (usually the list varies between 8 to 40), the insurer will pay him/her the sum assured for the rider.
Let’s suppose you have a Rs 1 crore term insurance cover and a critical illness rider of Rs 20 lakh with it. Now on being diagnosed with a critical illness, the insurer will only pay you Rs 20 lakh assured for the critical illness rider. This money can be used for treatment or any other purposes.
- Terminal Illness rider:
Having this rider ensures that if the policyholder is suffering from an incurable illness and likely to die under the next 6 or 12 months, then the insurer pays the sum assured to the insured/nominee without waiting. However, this has to be confirmed by the registered medical practitioners of that specific field.
Say a policyholder has a Rs 1 crore term policy and is suffering from the last stage of cancer. Now if the doctor who is treating him/her confirms that the insurer will die within a few months, then the entire sum assured for the policy will be paid to him immediately. But the insured has to have the terminal illness rider to avail of this benefit.
- Waiver of premium riders
There are two kinds of waiver of premium riders available – (i) Waiver of premium on disability and (ii) Waiver of premium for critical illnesses.
Let’s look at these 2 riders in little more detail
(i) Waiver of premium on disability rider
If a policyholder buys a waiver of premium on disability rider, then in case of permanent disability, he/she would not have to pay the premium for the term plan in the future. But the policy will remain active till the end of the tenure, and the sum assured remains the same.
(ii) Waiver of premium for critical illnesses riders
Under this rider, if a policyholder is diagnosed with one of the critical illnesses mentioned in the policy, then his/her future premiums for the policy will be waived off. And like in the case of waiver of premium on disability, the policy will continue till the end of the tenure.
- Income benefit rider:
The income benefit rider ensures that if the policyholder dies during the policy tenure, his/her family will receive the sum assured as a monthly income for a fixed tenure instead of a lump sum. However, while buying the rider with the term insurance, the policyholder has to decide for how many years he/she wants their dependent to avail this benefit.
Say a policyholder has a Rs 1 crore policy and he buys an income benefit rider with it opting for a tenure of 10 years. Now, after he dies, his family will receive the Rs 1 crore sum assured in a staggered manner for 10 years, ie Rs 10 lakh per year.
Having riders would make your term life insurance policy a little more expensive, but at the same time, they make the plan more comprehensive. And, in the time of need, these riders might turn out to be extremely beneficial.