Now while a life insurance is considered a sufficient cover in itself, riders provide an added layer of protection to it in terms of covering specific needs.While one individual might need additional cover, a second individual may want cover for a specific ailment. That is where insurance riders play a critical role.
By definition, a Rider is an attachment to a document which adds to or amends it. Riders are add-on risk covers in insurance policies that can be brought and attached to the basic policy. The riders have pure risk cover features and do not contribute towards the maturity proceeds. The sum assured of a rider has to be less than or equal to the basic sum assured of the policy. The riders can be removed without discontinuing the policy. Some companies also allow adding riders to existing polices.
Types of riders
ADB rider: Accidental Death Benefit
Accidental death benefit rider, if added, will increase the death risk cover due to accident only. As per the definition, accident should be sudden, it should show external injury and it should be unintentional. In case of accidental death, the nominee will receive the basic sum assured plus sum assured under accidental death rider plus any vested bonuses.
Accidental total and permanent disability rider: In case of disability, there are some legal terminologies one must understand.
Total disability: The organ becomes 100% non-functional. For example, spinal cord broken and the person is bed ridden.
Partial disability: The organ can perform some functions. For example, the leg is broken but the person after recovery can walk with a limp.
Permanent Disability: The ability to perform with the limb is disabled for life. For example, even after recovery, the person is not able to walk normally.
Temporary Disability: The ability to perform when the limb is disabled for a limited period. For example, the arm is fractured but after recovery it functions normally.
Hence for the accidental total and permanent disability rider to come in affect, due to accident, the organ loses 100% ability to perform and the disability is for life.
ADDDB rider: Accidental Death Disability and Dismemberment benefit
This rider will increase the death benefit due to accident. In case of total permanent disability, the amount equal to the ADDDB sum assured is paid. In case of dismemberment of an organ, the amount equal to the ADDDB sum assured is paid. The policy document clearly defines the time duration and amount to be paid in case of disability or dismemberment.
Critical illness rider
On diagnosis of any one of the listed critical illness, the person insured is paid a sum assured in parts or in lump sum. In case a person is diagnosed with a critical illness, then there is a minimum survival period after which the claim is disbursed. Different life insurance companies have different number of critical illness covered. The list of critical illness and the claim payment procedure is clearly mentioned in the policy document.
Wavier of Premium rider comes into force in case the life assured is hospitalized for 6 months or more. In such cases, the life assured is not able to earn and hence will not be able to pay the premium. Depending upon the severity of illness or injury due to accident, the WOP will continue till such time that the life assured is unable to work. The WOP can be in affect till the maturity of policy. For example if a person, has spinal injury and becomes bed ridden for life, then all the future premiums will be waived and the life assured will get all the maturity benefits at the time when the policy matures.
In WOP rider, the life assured and policy holder has to be one person. The exclusions under this rider are (a.) willful or self-inflicted injury. (b.) Attempted suicide (c.) The unlawful use of alcohol, narcotics and psychotropic drugs. (d.) War, civil commotions, riots, revolution, invasion (e.) flying activity, except as a bonafide passenger. (f.) Participation in criminal or unlawful act. (g.) Participation in hazardous sports, hobbies or past times. (h.) Atomic energy explosion or radiation of any kind (i.) if sickness occurs within 180 days of effective date of rider.
Advantages of attaching riders
It is highly recommended to add riders to a basic policy because by paying a little extra, the risk cover is increased manifold. The main objective of life insurance is ‘risk protection’.
- If a person has opted for accidental and term rider, then the benefit of insurance, in case of accidental death will be 3 times the sum assured.
- If a person survives the accident but gets disabled, then he/she will not be able to work. In such case then who will pay for the premium? If the WOP rider is not taken, then the policy will get lapsed and the life assured will lose all the benefits of the policy.
- Treatment of critical illness is not only costly but also hinders a person’s ability to work. Thus, having a large fund will get you good treatment and surplus money for household expenses.
- Critical illness sum assured is given irrespective of treatment undergone. For example, if a person is diagnosed with blocked artery and is advised bypass surgery by the doctor, the insurance company will give the sum assured. If the person opts for Ayurveda or any other form of treatment, then no questions will be asked.
Riders should be attached with all protection plans which have been taken with specific objectives like children education, marriage, asset building and covering for health related issues.
Buying an insurance policy with a large risk cover can be a very costly affair and may not be financially viable for everyone. Riders are the answer to this problem as they are relatively cheaper.