Term Insurance Riders
Term insurance is an important financial instrument that can keep your loved ones protected against the financial hurdles in your absence. When you buy term insurance, you pay for a life cover` that offers you protection for your life during the term of the policy. In order to enhance the coverage of your plan, insurers also offer riders or add-on benefits with term insurance. These optional benefits can be bought at a small additional cost and offer additional protection, such as critical illness cover, disability cover, accidental death cover, and more.
What are term insurance riders?
Term insurance riders are optional add-ons to your basic term insurance policy to enhance its coverage. Riders enable you to enhance your insurance policy to match your unique requirements. You can add a rider at a marginal extra cost over the base premium.
Benefits of term insurance rider
Term insurance riders enhance your term insurance plan's coverage by offering additional financial protection. They also offer many other benefits. Below are some of their advantages:
Enhanced sum assured
Riders can offer you an increased sum assured. Some policy combinations, like term insurance with an accidental death benefit rider, give you additional financial coverage. For example, if the base policy provides a ₹ 1 crore sum assured and an accidental death benefit rider is added to it, then the nominee will receive an extra ₹ 50 lakh in case of an unfortunate event of your demise due to an accident. This will enhance your overall coverage to ₹ 1.5 crore.
Protection for family
Term insurance riders offer financial security to the family of the insured. These riders provide additional financial support to beneficiaries beyond the base policy if an unfortunate event occurs, such as an accidental death, disability or diagnosis of a critical or terminal illness.
Affordable
Term insurance riders are a cost-effective way to ensure better financial security in the long run. Buying separate covers can be more expensive. Adding riders to an existing plan can be a lot more affordable.
Tax benefits
Similar to the tax-deductible premium of a term insurance policy under Section 80C# of The Income Tax Act, 1961, riders also come with their tax benefits. You can claim deductions for the premiums paid towards the accidental death benefit rider under Section 80C# and the premiums towards the critical illness rider under Section 80D# subject to the conditions prescribed under them.
What are the different types of term insurance riders in India?
Term insurance plans can be further enhanced with riders. Here are some term insurance riders that are available in India that you can add to your policy for better protection:
Accidental death benefit rider
The accidental death benefit rider provides an extra payout to the nominee if the policyholder passes away due to an accident. In such instance, the nominee will receive not only the basic life cover` but also an additional benefit from this rider.
Permanent and partial disability benefits
The rider offers financial support if the policyholder is diagnosed with a permanent or partial disability due to an accident during the policy term. A fixed percentage of the sum assured is paid over a period of time to the policyholder to help them maintain financial liquidity. This can be especially helpful if the disability affects the policyholder’s ability to work and earn.
Critical illness rider
The critical illness rider is much like health insurance. Term insurance with a critical illness rider provides a lump sum payout on the first diagnosis of a critical illness covered under the plan, such as cancer or a heart attack. The payout can be used to cover healthcare expenses, replace income or manage other miscellaneous costs during treatment.
Waiver of premium rider
With the waiver of premium rider, if the policyholder becomes seriously ill or disabled during the policy term, all future premium payments are waived off. The policy remains active, but the policyholder no longer has to pay any premiums. The rider helps reduce financial stress during tough times.
Terminal illness rider
If the policyholder is diagnosed with a terminal illness during the policy term, the terminal illness rider offers an early payout of the sum assured. The amount can be used to cover medical care or fulfil other personal goals during the difficult phase of life.
Why should you add riders to your term insurance plan?
Below are some reasons to add riders to your term insurance plan:
Enhanced coverage: Riders enhance the scope of your policy and protect you in a variety of situations that standard life cover` alone may not address.
Health-related benefits: Riders offer health insurance benefits. For example, term life insurance with a critical illness rider pays out a guaranteed lump sum if you are diagnosed with a serious illness. This can help you manage medical costs, while your base term plan continues to provide life cover` for your family.
Cost-effective option: Riders can be added at minimal extra cost to an existing policy. They are more economical than purchasing a separate plan and help you save money.
What are the important things to know about term insurance riders?
Below are some important things to know about term insurance riders:
Choose riders based on your needs: You do not have to add all available riders to your term insurance plan. It is important to evaluate your financial goals and personal circumstances, then select the ones most relevant to you.
Understand the costs: While riders are generally cost-effective, they will still increase your overall premium. So, make sure the added protection fits within your budget.
Check inclusions and exclusions: Go through the policy document carefully to understand the coverage offered by the rider.
Factor in your occupation and health history: If your profession involves higher accident risks, an accidental death or disability rider may be helpful. Similarly, your medical history can help you decide if you should purchase a critical or terminal illness rider.
Conclusion
The combined coverage of a term insurance policy and its riders ensures your family's financial stability. It is advised to evaluate and understand your need for riders and compare their premium before selecting the ones that can help you and your loved ones at critical times.
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