Overview of Riders in Life Insurance

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Overview of Riders in Life Insurance
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• We dont want to settle for plain things in life.
  We add something to them to enhance the utility
  derived from them. This behavior is exhibited
  even in the simplest of things we buy, for
  example, very few people enjoy plain vanilla ice
  cream. Vanilla ice cream is often eaten by adding
  nuts and chocolate sauce over it. Similarly, a
  plain cheese pizza is not very palatable for many
  unless extra toppings are added over it.

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• The quest to customize things according to our
  whims is really deep rooted be it our food, cars,
  bikes, interior décor or even financial
  instruments. The extra toppings provided by life
  insurance companies to enhance benefits of their
  policies are called riders. Like other forms of
  customization, Riders bear a cost. By paying
  extra Premium one can attach riders to their life
  insurance plans
• Life insurance riders enhance the financial
  Coverage over and above the basic sum Assured in
  a life insurance Policy and come into play in
  case of a specific eventuality.

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Types of Riders Popular in India

• 1.       Critical illness Rider
• Under Critical Illness rider the insurance
  company pays a specific lump sum amount or
  regular periodic payout to the policyholder on
  contracting a disease mentioned in the list of
  critical diseases. A range of diseases are
  classified as critical diseases like heart
  attack, cancer, stroke, kidney failure,
  paralysis, Parkinsons disease, Multiple
  sclerosis etc. When a person contracts such
  disease his working capacity can be compromised
  and heavy treatment cost is also needed. Thus,
  the insurance company pays a specified percentage
  of the Sum Assured when intimated about such
  diagnosis. The remaining sum assured after
  deducting the amount paid under critical illness
  rider is paid at Maturity or specified
  eventuality. 

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• 2.       Disability Rider
• Bodily disability can happen because of an
  accident. Disability might be permanent or
  temporary. It impairs or affects the work of an
  individual in many cases. For example, example if
  a writer loses his eyes he wont be able to
  perform his profession. Under this rider the
  insurance company pays a regular monthly income
  to the Policyholder on acquiring a disability for
  up to 10 years. The monthly payout is usually 1
  of the sum assured.

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• 3.       Accidental Death Benefit Rider
• Death of a family member is a hard thing to bear.
  It is even harder if it is because of an Accident
  as accidental death is usually sudden. The family
  does not even get time to ready itself for it.
  Under accidental death benefit the insurance
  company pays up to double the sum assured in case
  of death due to accident. For example, if the sum
  assured of a policy is INR 50 lacs and the
  policyholder dies because of accident during the
  currency of the policy, the nominee would receive
  INR 1 crore as death benefit.

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• 4.       Term Rider
• Under a Term rider the nominee of the
  policyholder gets monthly income along with the
  lump-sum proceeds. Many families prefer to
  receive a monthly income over a lump sum amount
  because of the fear that the lump might get spent
  by them. In order to have a long term security
  they prefer to have regular monthly income over a
  period of time.

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• 5.     Waiver of Premium Rider
• A Waiver of premium rider in an insurance policy
  is a clause that says the insurance company would
  write off or will not require the Insured to pay
  future premiums to maintain the policy under
  certain conditions like death or disability of
  the policyholder. The policy continues as it is
  without any obligation on the insured or nominee
  to pay future premiums.

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Can Riders be Attached With any Life Insurance
Plan?

• Policyholders can attach or top up any of the
  life insurance plans with riders be it a term
  plan, endowment or even ULIP. The policyholder
  should evaluate the needs and requirements of the
  family and based on those select what types of
  riders they should have on their life insurance
  plan.