Non-Clinical Support » Personal Finance

Life Insurance Riders

by Dr C H Asrani

FAQs

What is a Rider?
A rider is an additional coverage that can be attached on to a basic life insurance policy. Just like the topping on a pizza, it is an "extra" that is not in the basic policy one may be buying.

Do I have to pay extra money?
Yes. Riders are not without costs, but such extra benefits can provide true enhancements to conventional life insurance. The fee of the rider depends on which rider option the insured chooses upon purchasing.

Why should one opt for rider(s)?
Riders, typically, supplement an existing life insurance policy with wider coverage. Adding extra services to a life insurance policy may increase your premiums, sometimes substantially. Make sure the coverage is really worth the extra cost.

Do all companies offer riders?
Yes! All companies offer riders. This is one of the best things that happened to Life insurance industry with the entry of private enterprise. There are few (eg Critical illness, accidental death, disability benefit) that are offered by all and some which are company specific (waiver of premium).

Do all of them have similar guidelines?
Like their life insurance products even their riders have different terms and conditions. Almost all companies have a restrictive clause, which is mostly not clearly disclosed in the policy document. Their sum and the term of coverage, exclusion criteria as well as their terms of claim processing vary.

But is taking Life Insurance not enough?
By purchasing Life insurance, we are preparing for a contingency that should the bread earner of the family have a untimely demise the family should be able sustain themselves. If things go well, then at the maturity we can enjoy the booty of our savings. We are preparing for, sorry to be blunt, DEATH but are we prepared for a life that is worse than death?

Imagine

• Struck with a killer disease like cancer but unfortunately surviving for, say, 5 yr.
• Like Rajesh, accidental loss of 1 or more limb(s); hemiplegia due to disease; blindness due to disease → loss of revenue earning capacity & capability → what then? Life insurance money will only come in after death!
• Major medical expenditure (bone marrow transplant) → more than what health insurance can pay.

Is there a limit to the sum assured and the term of coverage of a Rider?
The sum assured on the rider is restricted to the sum assured on the base policy and in most cases further restricted to Rs 10 lakh. Some companies offer them up to Rs 25-50 lakhs as well but that depends from case to case. The term of the rider is equal to the term of the base policy one has taken but as already mentioned once a rider claim is made, the rider is terminated.

What about tax benefits?
The premiums on the riders are available for rebate under Section 88 or Section 80D of the Income-Tax Act, 1961.

Should a Rider be attached ONLY while purchasing Life Insurance or it can be attached later as well?
It can even be attached later and here again companies have their own guidelines eg ICICI Prudential lets you attach one till the first anniversary of the policy.

But do they pay in time?
If the claim is clean, ie it satisfies all claim criteria and there has been no non disclosure, the payout is fast and at times within days.