Life Insurance – Riders and Benefits
There are many nooks and corners on the road to understanding life insurance. It is an intricate financial product and the bitter fact is that a basic plan is just not enough to cover these intricacies. That’s where riders and benefits take the stage.
Riders are the optional add-ons to the basic plan that not only widen the insured’s existing coverage but also give them the flexibility to customize their insurance plan as per their needs. Riders offer substantial benefits and can be bought as a part of the plan at a nominal additional cost. Here are the common riders and benefits in a life insurance plan.
1). Waiver of Premium Rider
In case the insured dies or disables due to an illness or accident, the rest of the premiums on his plan are waived off and are paid by the insurance company. This rider is particularly useful in Child Plan where if the father (life insured) dies, the rest of the premiums are taken care of by the insurance company till the end of the policy term. Once the child attains the maturity age, he/she gets entitled to receive the maturity amount.
Plan without WOP Rider
Plan with WOP Rider
Insured Gets Disabled
Insured no more able to pay the premium
· Policy continues (Insurance company pays the rest of the premium)
2). Accidental Death and Disability Benefit
If the insured dies of an accident, his/her nominee becomes entitled to get a pre-decided sum assured (rider sum assured) over and above the basic sum assured. This rider is quite beneficial for those who travel frequently and stand more vulnerable to accidents.
If the insured suffers a disability/dismemberment due to an accident, the insured will get the survival benefit that will be calculated as a percentage of the rider sum assured according to the type and severity of disability.
3). Family Income Rider
If the insured dies, the beneficiary will get the death benefit and a monthly income on a regular basis. If the insured gets disabled, he/she will get a monthly income on a regular basis. The monthly income is calculated as a percentage of the rider sum assured based on what income would the insured be getting if the misfortune hadn’t struck him/her. The income is paid to the insured to the end of the term or a pre-specified period such as 10 years. This way the insured and his/her family get free of the stress of being in no-more-income zone.
4). Return of Premium Rider
Return of Premium rider is a valuable add-on to a term life insurance. A conventional term plan pays out nothing in case the insured outlives the policy term. However, with ROP rider, the insured gets entitled to receive a survival benefit. The sum of all the premiums paid over the term is paid back to the insured.
5). Preferred Term Rider
In case the insured dies during the preferred term, the beneficiary would get an additional death benefit apart from the usual basic sum assured. The preferred term benefit amount is either equal to or less than the basic sum assured. Put simply, it is a way to increase the cover at a nominal cost.
A case scenario – Nitin is looking to get a life cover of Rs 20 lakh on his plan. But as per his affordability, the maximum cover he can get is Rs 15 lakh. What he can do is buy a Preferred Term Benefit and get an additional Rs 5 lakh cover at a nominal additional cost.
6). Extended Life Cover
This feature lets the insured to extend the life cover up to 5 years after the end of the policy term, without having to pay the premium. The sum assured (life cover) payable in such case reduces by a certain percentage of the original sum assured.
7). Increasing Term Rider
In a standard term insurance, the life cover remains constant throughout the policy term. But with an Increasing Term Rider, the cover increases at specific periods of the policy term according to the fixed rate mentioned in the policy. To understand it a little better, here’s an example.
Mansi opted for a life cover of 15 lakh on her plan. She also buys the Increasing Term Rider along with her policy. As per her plan, the life cover would keep on increasing at a 5% rate every year, upto a maximum of 25 lakh. After 10 years her life cover would increase to 25 lakh. If she hadn’t opt this rider, her life cover would have remained constant at 15 lakh only.
8). Critical Illness Rider
The hospital expenses associated with critical illnesses such as stroke, heart attack and cancer are staggering. Life insurance covers only death and lends no financial help in a critical illness. But if the insured buys a Critical Illness Rider, he/she will be paid out a lump sum (rider sum assured) if diagnosed with such a dreadful illness.
This lump sum is sufficient enough to cover the huge medical expenses needed in the costly treatment involved.
9). Guaranteed Insurability Rider
This rider enables the insured to extend his/her life cover in the future, at specified periods of the policy term, without having to go through medical examination or provide evidence of insurability.