Most of you will be aware about the importance of having life insurance in your financial portfolio. However, there are times when just a life insurance policy might not be enough. Depending on your needs, you may require additional protection, and this is where a rider comes into the picture. Riders typically cover additional risks like accidents, critical illness or permanent total disability which are beyond just life risk of the policyholder.
What are riders?
When you need additional protection or coverage, you can either buy a new insurance policy or utilize the option of buying a rider with an existing insurance policy. You may weigh your options based on cost and benefits, and then make a decision. In most of the cases, a rider comes at a lower cost.
Riders are the additional benefits that can be added to a basic insurance policy. They allow you to enhance your insurance cover. Depending on your need, they can be added for an additional cost which amounts to paying an extra premium.
The main reason why riders are so popular is that you can add them to a basic insurance policy to include extra protection on death, accidental death, illnesses, disability etc, at a lower cost. Moreover, you can attach insurance policy riders to almost any form of insurance- be it term insurance, an endowment policy or a whole life policy.
There are various types of riders. Here is a list of a few of them:
Accidental Death or Double Indemnity Rider: This rider pays an additional payout in case the insured meets with an accident and dies. The policy documents will cover all the required details like the age, the term of the rider, etc. This rider is not an expensive one and proves to be of a great benefit.
Waiver of Premium Rider: Under this rider, the future premiums are waived off if the insured becomes permanently disabled as a result of injury or illness prior to a specified age. The rider exempts the insured from paying any further premiums. The main benefit of this rider is that it prevents the lapse of the insurance policy. This kind of rider is typically inbuilt in a child insurance plan.
Income benefit rider: This rider guarantees that the family will continue receiving regular monthly income if the insured dies.
Dread Disease rider: This rider provides an additional amount on diagnosis of critical illness or permanent total disability. The company, usually, does not ask for evidence of treatment after the money is paid out.
Term rider: This rider provides additional death benefit for a specified period of time. This means if one takes this rider, an additional amount will be paid to the nominee on the death of the policyholder.
Besides this, there are other riders which are available to cater to various specific needs as per your requirement.
To conclude, I would say that you must consider riders if you wish to increase your insurance coverage, and that too at a lower cost. Riders, if selected properly, and in accordance to your needs, can add great value to your protection.
The author is Director-Marketing Aviva India.