scorecardresearchWhat are Riders in Life Insurance?

What are Riders in Life Insurance?

Updated: 04 Apr 2022, 05:32 PM IST

Riders are simple coverage extensions that can be added to the base coverage of a policy. They look appealing, but come at a price which is over and above the premium. Let us explore more on this

Riders can be defined as simple coverage extensions that may be added to a life insurance policy's base coverage to expand its coverage.

Riders can be defined as simple coverage extensions that may be added to a life insurance policy's base coverage to expand its coverage.

Individuals need financial security, and life insurance is one of the most essential tools that may help them achieve it. Anyone who is the sole breadwinner of the family and has family members depending on him immediately qualifies for a life insurance policy, the primary aim of which is to safeguard your loved ones financially in the event of your untimely death.

When it comes to life insurance, it is something that differs based on the demands of the individual. Different people have different financial conditions and demands, which influences their life insurance needs.

Considering that Mr. A has considerably more assets than Mr. B, the quantity of insurance Mr. A needs may be drastically different from what Mr. B requires. The add-on rider is one of the most significant features that may assist increase the value of a life insurance policy for the policyholder.

Definition of a Rider

In basic terminology, Riders can be defined as simple coverage extensions that may be added to a life insurance policy's base coverage to expand its coverage. They are optional features that may be purchased and added to a standard life insurance policy which let you create a policy and, if you satisfy their requirements,in return may offer a variety of protection.

Importance of Riders in life insurance

Let us try to understand the importance and benefits of an add on rider in life insurance.

Allows policy customization

If you have a term life insurance policy that offers minimum insurance against the risk of injury or death, an add-on rider with the policy allows you to modify the policy. You can receive additional coverage against a possible danger that isn't covered by your policy by adding the proper rider.

Removes the need for a separate policy

Life insurance plans cover a variety of risks, including loss of income,permanent disability, temporary incapacity, accidental death, critical sickness and many more. However, you'll seldom come across a situation where a single insurance covers numerous risks. This is when the add-ons come in handy. You may add a rider to your basic plan to receive additional coverage without having to buy a separate policy.

Makes insurance more affordable

As previously noted, having an add-on rider eliminates the need to purchase a separate life insurance policy. As a consequence, you will not be required to pay additional payments for a new life insurance policy. When compared to the premiums payable for a fully functional life insurance plan, the rates for an add-on rider are substantially cheaper. As a result, having an add-on saves you a significant amount of money, which is always a beneficial move.

Types of riders in life insurance

There are four basic types of riders available as an add on in life insurance.

Term riders

Term riders are a type of insurance that provides extra risk coverage in the event of death. This can be added to a basic life insurance policy for a low cost add-on benefit. However, the rider can only be applied to non-linked plans at the start of the basic policy.

Rider for accidental death benefits

The accidental death benefit rider, as the name implies, offers an additional payout to the policyholder's family in the event of death due to an accident. This can also be added as a rider to a basic life insurance policy. If purchased separately, it provides complete coverage as well as the option of disability coverage. If the policyholder has a separate policy, he or she is also entitled for a living benefit in the event of a partial or permanent disability that results in a loss of income.

Premium rider waiver

If the policyholder dies or becomes partly or permanently handicapped during the policy term and has chosen the waiver of premium rider, the policyholder's premium will be waived. The policyholder's family or surviving parent does not have to pay any further premiums to keep the insurance active. The insurance company pays the remaining payments on the policyholder's behalf, and the policy remains in effect until the conclusion of the policy term.

Rider for critical illness

This coverage protects policyholders against serious critical illnesses that aren't often covered by health insurance. This includes advantages for the heart and arteries, cancer, a key organ, the brain, and the neurological system. Payments might also be given in a lump amount to the policyholder on the first incidence of any severe sickness. The extra rider is cancelled when CI benefits are paid, but the base policy remains in effect.

In conclusion, It is up to the insured person to decide whether or not to purchase an insurance rider, and they should evaluate the cost against their specific needs. Although riders may appear tempting, they come at a cost — in addition to the policy's premiums. Another thing to keep in mind is that a rider may duplicate coverage, so go over the main insurance contract thoroughly.


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First Published: 04 Apr 2022, 05:32 PM IST