Choosing the perfect rider for your life insurance policy



The riders offered by insurers provide benefits that are tailored to meet the needs of different people differently

Life insurers offer a range of riders that you can buy with your life insurance policy by paying an additional premium. Sometimes, insurers provide riders in bundled plans to lure customers. Many riders may suit your needs. But, should you increase the life insurance element by buying these bundled plans?

Let us look at the types of riders available, and who should ideally buy these riders along with life insurance.

A rider is a voluntary add-on that you can typically buy with life insurance. Some familiar riders are accidental death benefit rider, waiver of premium rider, income benefit rider, special exit value rider, premium break rider, guaranteed insurability option rider and critical illness benefit rider.

Accidental death benefit rider: Accidental death benefit riders promise an additional sum insured to policyholders upon their death in an accident. Suppose a base policy offers a sum insured of 50 lakh, and the policyholder has availed accidental death benefit rider for 10 lakh. Upon the policyholder’s death, the insurer pays 60 lakh to the beneficial nominee.

This rider is essential in today’s life, as almost everyone needs to travel for their jobs, business or other work. “Probably, you are careful when driving. However, you can’t be sure about others driving on the road; hence, this rider is essential for people travelling inter-city, outside the city or abroad," said Naval Goel, founder and chief executive officer,

Waiver of premium rider: Generally, a policy automatically lapses when an insured discontinues premium payment due to job loss or disability. However, this rider helps a policyholder to keep the policy active despite non-payment of premium in such cases. It keeps the insured entitled to their policy and provides access to all its promised benefits.

According to industry experts, this rider helps people working in vulnerable environments and who require frequent hospitalization that affects their income.

Income benefit rider: This rider provides the policyholder’s family with additional income annually besides the sum insured. “The breadwinners with large and extended families can go for this option as at times only the sum insured is inadequate for the survival of the family that may include aged parents, children and spouse with no income source. It helps sustain the policyholder’s family, said Goel.

Critical illness benefit rider: This rider pays a lump sum upon valid diagnosis of a critical illness covered in the plan that can be useful to policyholders or their family in dire times.

Anyone who has a history of critical illness in the family or is likely to get one in the future due to lifestyle can take this rider. Piyush Trivedi, joint president, Kotak Life Insurance, said, “Given the incidence rates of critical illness and the impact of lifestyle-related illness, this benefit is relevant for all individuals irrespective of age. If we still need to identify a segment, any individual 30 years and above should have this cover."

Return of premium rider: This rider helps a policyholder get a refund of the total premium paid for the term insurance if he survives the policy tenure. But if the policyholder dies during the policy tenure, the sum assured is paid to the nominee.

Most people feel term insurance is a waste if they survive the policy tenure. Thus, people looking for some return on their survival can buy this rider. An industry expert said a conservative investor looking for financial security and protection could buy this rider.

Accidental disability benefit rider: If the policyholder faces a permanent or partial disability due to an accident, this rider comes into play. The policyholder can get regular pay for the next 5-10 years after the accident in a specific percentage of the sum insured. This steady income may work as a regular income for the policyholder. People involved in travelling, driving or riding bikes can opt for this to ensure that no accident-led event makes their family suffer. Trivedi said, “Again, this rider can be taken by all age groups between 18 and 50 years, along with the other riders taken."

Special exit value rider: This rider allows the policyholder the freedom to choose a time to exit a policy and receive all premiums paid for the base protection benefit. This rider can be availed when the policyholder does not take the return of premium.

According to Goel, people who think their financial responsibilities towards their family will be over by the age of retirement and their family will not depend on them for finances can use this rider. “This rider is for the masses as it comes free of cost," he said.

Premium break rider: This rider allows you to take freedom from the premium payment twice during the policy by taking breaks and still have the policy active. It helps policyholders skip paying a premium for a year, during which their policy will still cover them. The first break can be availed only after 10 policy years, if the policy is in force. The policyholder can exercise the second premium break only after a minimum of 10 years from the first premium break.

According to industry experts, this premium can help policy buyers in the 30-35 years age group who would like to take a break from insurance premium payment to fulfil their other responsibilities such as children’s education fees or surgery in future.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.