A ‘term insurance’ is a type of life insurance that provides financial protection for a set amount of time. Suppose something unfortunate happens to you while the policy is still in effect. During the term policy duration, the death benefit is paid to the nominee. Also, because there is no cash value in term insurance plans, they are much cheaper at the beginning than permanent life insurance policies. Simply put, the only value in term insurance plans is the assured death benefit that the beneficiary can get. However, you can enhance your policy’s coverage with the help of term insurance riders.
What is the meaning of Riders?
Term insurance riders are additions or changes to a term insurance plan that gives the policyholder more coverage and make the plan more useful. Aside from the death benefit that comes with a term insurance policy, riders offer several other benefits.
Most term insurance policies offer riders, but their costs and terms depend on the term policy, the premiums, and the insurance company. Also, some riders come with term insurance plans as part of the package, while other riders must be bought separately by the policyholders by paying extra premiums. Many times, the premiums for riders are less than the premiums for term insurance policies, and the amount obtained from riders is also less than the amount covered by insurance.
Types of Riders in Term Insurance Policies:
It is possible to add the following term insurance riders to give the policyholders extra benefits:
- Accidental death rider: If the insured person breathes his last in an accident during the policy term, this rider pays the beneficiary an extra amount on the original sum assured. This amount is calculated based on the initial sum assured by the term plan. The percentage of the additional amount could be different from one company to the next, and there could be a limit on how much the accidental death rider would cover. The premium, however, stays the same for the whole policy period. This rider only applies if the insured person passes away in an accident.
- Critical illness rider: Critical illness riders protect policyholders from major illnesses like cancer, heart attack, kidney failure, and paralysis, among others, that would otherwise cost a lot of money to treat. These riders pay out a lump sum to policyholders if they are diagnosed with a medical condition already listed in the policy. So, it is essential for the policyholder to carefully read the policy and know what illnesses the rider covers.
- Accelerated death benefit rider: Suppose the policyholder chooses this rider and has been told they have a terminal illness. In that case, the accelerated death benefit rider lets their family get a part of the sum assured early. This money can be used to pay medical bills. This rider doesn’t cost much, and it says what percentage of the sum assured can be paid upfront. The rest will be given to the beneficiary after the policyholder’s passing.
- Accidental disability benefit rider: The disability benefit rider covers the risk of an accident that could leave the insured person partially or permanently disabled. Most policies pay a percentage of the sum assured to the disabled policyholder for five to ten years after the accident. This rider is often added to the accidental death rider. It only kicks in if an accident leaves the policyholder unable to work.
- Waiver of premium rider This rider is helpful if the policyholder loses their job or becomes disabled and can no longer pay their premiums. With this rider, the policy stays in effect, but you don’t have to pay any more premiums. Without the rider, if the insured can’t pay the premiums because of a loss of income or a disability, the policy will expire, and the beneficiary won’t get any death benefit.
- Income benefit rider This rider is meant to make money for the policyholder’s family after they pass away. With this rider added to the insurance plan, the policyholder’s family can get extra money every year for the next five to ten years after the policyholder passes away, on top of the term plan’s sum assured.
Riders give policyholders a way to protect their family members’ future in case an accident leaves them partially or permanently disabled or worse. They are also eligible for certain term insurance tax benefits by Indian law. These benefits may vary depending on the tax regime followed (old/new), the policy chosen and more.
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