Term Insurance Riders: What Are They And Why Do You Need Them?
Life insurance riders are add-on benefits for a term policy to increase its coverage. They provide additional protection to the policyholder and their beneficiaries based on the conditions associated with them.
A term rider or term insurance rider is a cost-effective technique to increase term insurance coverage for a specific period without purchasing a separate policy. These riders are usually customised based on the requirement of the policyholder during the purchase of the term policy or after that. For example, there is the accidental death rider, critical illness insurance rider and many more.
This article will discuss more about these riders in detail and also show you how you can use them to safeguard your family’s financial security.
Types of riders in term insurance
- Accidental Death Benefit Rider
This rider provides financial coverage in case of accidental death of the insured person. It pays out a lump sum amount to the policyholder’s nominee in case of accidents that lead to the insured party’s death during the policy rider’s tenure. The payout is generally a portion of the actual sum assured, and it may vary from one insurer to another.
- Permanent Disability Rider on term Insurance
The accidental disability rider or permanent disability rider allows a payout of the original sum assured of the term insurance policy. The benefits are paid in case the insured is permanently disabled after an accident. The amount of payout is calculated on the actual sum assured and is paid for a period of time, e.g. 5 years or 10 years.
For the very nature of this rider, it is often considered a source of income for the disabled person. The amount of compensation, however, is determined based on the severity of the injury or disability and per the policy guidelines.
- Critical Illness rider
Under the life insurance policy, a critical illness rider covers a predetermined list of critical illnesses or medical conditions. Its purpose is to protect the policyholder from the financial burdens that may come in the event of a diagnosis of a critical illness.
For example, suppose the policyholder is diagnosed with a specific critical illness. In that case, the family will receive a payout in the form of a lump sum as per requirement based on policy guidelines. But keep in mind that critical illness riders cover only the listed diseases. So it is recommended to read the policy wording carefully before adding this rider to your term life insurance policy.
- Premium Waiver Rider
Adding this unique rider can waive future premium payments towards the base term insurance policy in case of loss of income or disability. The best part is that the base insurance still stays activated. With the addition of the premium waiver rider to the policy, the policyholder can ensure that their family is secure even if he is unable to pay future premiums.
- Terminal Illness Rider
This rider is extremely helpful in case the insured person is diagnosed with a terminal illness after buying a term policy. If you add this rider to your base term insurance policy, it will initiate a partial payment of the original sum assured right after the diagnosis of any terminal illness. You can use this amount in your treatment. The percentage of the sum assured that will be paid in advance is often specified at the time of purchasing this rider.
Before deciding to add any rider to your term insurance policy, it is essential to understand what each rider has to offer concerning its benefits inclusion and exclusion. It is advisable always to compare the cost of riders as different companies offer different riders, and sometimes some riders are bundled with base policy.
Also, assessing your need for the specific rider is essential. You should conduct a thorough analysis or choose reputed term insurance plans like the Tata AIA term insurance where a team of experts will advise you on adding riders.