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Is your term life insurance policy adequate to meet all future contingencies or unforeseen situations? Chances are, it’s not. Various scenarios may occur in the future, like a life-threatening disease or an incapacitating accident. Such situations necessitate the presence of broader coverage that financially safeguards you and your family. This is where insurance riders come into the picture.
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Insurance riders ensure extra coverage and protection for policyholders at a nominal extra cost. You can select from several types of riders based on your specific requirements. Here we take a look at some of the valuable options available.
Some Handy Riders for Term Insurance Policies
You can always use a term insurance calculator to determine the amount of coverage you need. There are calculators for working out the premium amount payable as well. At the same time, you should not conclude the finalization process without looking at some of the best riders that you can opt for. Here are some options worth noting:
Accidental Death Benefit
With this insurance rider, an extra sum is paid out to the policyholder’s nominees in case of the policy holder’s death in an accident. This payout happens over and above the base sum assured of the term life insurance policy.
For example, suppose there is a sum assured of Rs. 1 crore (about USD 250,000) payable to the policyholder’s nominee in case of their demise within the term policy period. They may also choose an accidental death benefit rider for 20% of this sum assured amount. If they pass away due to an accident within the policy duration, their nominee will receive Rs. 1 crore and 20% of this amount, i.e. Rs. 20 lakh. Hence, they will receive a total amount of Rs. 1.2 crore.
Critical Illness Insurance Rider
This rider ensures a lump sum amount for the policyholder upon the diagnosis of any such crucial ailment or illness as listed under the terms and conditions of the rider. This ensures that the costs of medical treatment for the crucial illness in question are covered while keeping their family free from financial burden. It ensures that the future life goals of the family are not compromised due to skyrocketing medical costs.
Waiver of Premium
In case of the inability of the policyholder to pay the policy premium amounts because of critical illness, death, or any permanent total disability due to an accident, this rider waives all future premiums. This means the policy remains active for its entire duration without the payment of any premiums. This ensures extra security for policyholders in such scenarios.
Accidental Permanent Partial or Total Disability
This rider guarantees the payout of a lump sum to the policyholder in case of any total or partial disability resulting from an accident. This is immensely useful since the policyholder may have to cover medical costs while suffering from loss of income-earning abilities.
Family Income Benefit Insurance Rider
This rider ensures the payout of 1% of the sum assured each month for the remainder of the tenure of the rider. This is subject to a minimum duration of ten years in most cases. However, it only happens upon the occurrence of any event or contingency as outlined in the policy terms and conditions. The family thus receives a monthly income to help them cover the loss of income of the primary breadwinner while smoothly covering daily expenditures.
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How to Choose the Insurance Riders You Need
Once you have an idea of the available term life insurance riders, you should choose carefully, depending on your requirements. Riders such as accidental death benefits are suitable for those with daily lifestyles or work duties with higher risks of accidents or mishaps. Riders such as waiver of premium and those concerning disability may be helpful for those with moderate or minimum risks in terms of accidents and disabilities.
Critical illness riders will be helpful for people with higher risks of contracting such diseases or a family or genetic history of the same. These also come with lump sum amounts that may be used for meeting medical costs and covering the loss of income of the primary breadwinner due to the illness.
Remember that there could be scenarios where coverage may not be available under a rider for any particular ailment or illness. For example, a few exclusions cover the consumption of drugs and alcohol, death resulting from pre-existing illnesses, conditions resulting from external and internal congenital ailments, hormone replacement surgeries, injuries of a self-inflicted nature, cosmetic and dental surgeries, and more.
Also, the tax deductions that apply to term insurance policies can be enhanced with a critical illness rider. With a base policy, you can get exemptions on your premium payments up to Rs. 1.5 lacs under Section 80 (80C) of the Income Tax Act of 1961. With the addition of a critical illness rider, you can also get benefits up to Rs. 25,000 under Section 80D. You should ideally invest a little time and energy comparing multiple rider choices, ensuring their benefits sync with your future requirements and expectations. You should always go through the policy information carefully to avoid any surprises in the future.
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