Understanding Various Riders in Life Insurance Policy – Which Ones Should You Opt For?

insurance rider

You may often come across the word ‘riders’ while buying a life insurance policy. This article will discuss what riders are, what are the available types of riders and which ones should you opt for. Read to know about riders in life insurance policy.

What are Riders in Life Insurance Policy?

Riders are add-ons that provide additional coverage over and above the basic life insurance plan. They offer benefits only on the occurrence of the specific eventuality for what they are bought for and do not replace the basic features of your life insurance policy. Riders can be attached to any life insurance policy, such as money back, endowment, ULIP’s etc. Most insurers allow you to attach a rider at the time of purchase of the policy as well as at the later stage of policy also.

insurance rider

Riders come with an extra cost which is over and above the base premium of the policy. The cost paid towards riders is known as rider premium. The rider premium is lower than the premium of the base policies. The sum assured availed on riders is known as the rider sum assured. It can be lower or equal to the base sum assured of the policy.

Why Should You Choose Riders?

Riders help you customise your insurance policy against some vulnerable losses and life events at an affordable cost without buying the second policy. With riders, you can rest assured that you are protected against certain risks of life, like critical ailments and accident.

Tax Benefits on Riders

For taxation purposes, riders go in line with the insurance policies and are eligible for similar tax benefits. Any premium paid in respect of riders (except riders with health benefits) is eligible for deduction u/s 80C of the Income Tax of India. Riders with health benefits, get tax deductions u/s 80D. All the benefits receivable under these riders are tax-free in the hands of beneficiaries or insured u/s 10(10D).

Types of Riders in Life Insurance Policy

Though, riders benefits vary from one insurance company to another, broadly, their features remain same.

  • Critical Illness Benefit Rider (CIBR)

This rider provides benefit if the life insured is diagnosed with any of the critical disease stated in the policy document, like cancer, kidney failure, cardiac arrest, paralysis and organ transplant, among a few others. The CIBR from insurance companies such as ICICI Prudential covers 34 major illnesses in total. However, most of the life insurance companies include a survival clause of 30 days on CIBR. This means the life insured needs to survive for 30 days after diagnosis to make a claim. The insurance company will pay rider benefit only after the survival period.

  • Waiver of Premium Rider (WOPR):

In case of disability or critical illness of the policyholder, the insurer waives off all the future premiums. However, the benefits and coverage of the policy remain unaffected till the term of the policy.

  • Accidental Death Benefit Rider (ADBR):

If the policyholder dies due to an accident, the rider sum assured as well as the death benefit of the base policy is given to the nominee.

  • Income Benefit Rider (IBR):

This rider is meant to provide a regular income to the family in case of the death of the life insured. It ensures that a certain percentage of the sum assured is paid to a nominee for a specified time (generally 5 to 10 years) after the life insured’s death.

  • Spouse Insurance Rider (SIR):

This rider provides life cover to the spouse without having the policyholder to buy a second insurance policy. It gives the joint life cover to both husband and wife.

  • Major Surgery Assistance Rider (MSAR):

This rider covers any expenses incurred towards health ailments that require surgery. However, it doesn’t cover any pre-existing health conditions that require surgery or hospitalisation expenses for diseases that do not require surgery.

  • Guaranteed Insurability Rider (GIR):

This rider allows the policyholder to increase insurance coverage during the term of the policy, without any further medical examination.

  • Return of Premium Rider (ROPR):

In ROPR, the policyholder gets back the entire premium paid if he/she survives the policy tenure.

Which Rider is the Best for You?

Riders are specific to your age, health and personal requirements. It also depends on your existing insurance plans – both life as well as health.

If you are a frequent traveler, it would be a good idea to buy an accidental death benefit rider. If you are involved in a hazardous occupation that may cause disability, you might want to buy a rider that offers disability and income benefits to you or your family. For example, riders like accidental death and disability benefit, income benefit or waiver of premium. It is highly advisable to buy a critical illness rider as you can get coverage for ailments like cancer, heart issues, etc; whose treatment costs are very high.

Just like you add toppings in your pizza according to your personal preferences, riders in life insurance policies allow you to customise your insurance plan in accordance to your personal risks at a meager cost.

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