All insurance policies offer riders that provide the benefit of additional insurance cover on payment of extra premium by the insured person. Riders provide protection to the insured from host of unexpected events and calamities that may not be covered by the basic cover provided by the policy.
Riders add value to the basic policy and offer flexibility to the insured. Apart from these benefits, life insurance riders are exempt from tax under Section 80C of the Income Tax Act, 1961. Riders can be bought with any type of insurance policy, be it whole life, endowment, money back or unit-linked insurance plans (ULIPs).
Riders can be bought at any time during the tenure of the policy. The cost of riders is usually 5-10% of the total premium paid for the basic cover provided by the policy. One can buy as many riders as one wishes to, but the total premium paid on all the riders should not exceed 30% of the base premium of the policy.
Some of the common riders available on life insurance policies include accidental death benefit, critical illness cover, disability income benefit, waiver of premium benefit, etc.
In the case of accidental death benefit rider, the nominee of the insured gets an additional amount equal to or less than the sum assured. Critical illness rider offers cover medical expenses incurred in the treatment ad hospitalisation on account of critical diseases suffered by the insured.
The disability benefit rider offers guaranteed monthly income to the insured in the event of loss of income due to permanent or partial disability. Waiver of premium rider waives the premium to be paid by the insured in future if the insured suffers loss of income due to total or partial disability on account of any illness or accident.