Non-Clinical Support » Personal Finance

Life Insurance Riders

by Dr C H Asrani

Types

Different types of riders

1. Critical Illness Rider - One of the most commonly offered and opted for rider. A critical illness rider mainly helps to cover huge expenses that are incurred if one is diagnosed with a serious illness. This rider covers a certain set of critical illnesses (number and conditions vary from one insurance company to another). If the policyholder is diagnosed with any of these illnesses at any time during the policy term, he is entitled to get benefits under the rider. However, the rider would terminate with policyholder getting any one of the covered illnesses. That means you get benefit for ONLY one of the conditions covered.

The basic illnesses that are covered by all insurance companies are cancer, coronary artery bypass graft surgery, heart attack, kidney failure, major organ transplant and stroke. Other common illnesses, covered by different companies, are heart valve replacement, blindness, burns, paralysis and so on. Just like the conditions covered (ICICI Prudential covers 9 illnesses; HDFC Standard Life & SBI Life cover up to six critical illnesses and. Birla Sun Life recently launched its critical illness rider covering for 17 illnesses), the term of cover also varies. Eg SBI Life, offers a cover for a maximum term of 10 years.

2. Accidental Death or Double Indemnity Rider Accidental death is also known as double indemnity. Life insurance with this rider doubles the death benefit that the beneficiaries will receive if insured's death is purely accidental. Generally, the addition of this provision doubles the death benefit if one dies from an accident. Often the policy will stipulate an age when this coverage will unconditionally expire. Before purchasing a life insurance policy with an accidental death rider, one must read over the terms and condition carefully. One must also pay close attention to the insurance company's definition of "accidental", which is often very restricted and has very several exclusions. Adding this coverage is relatively inexpensive and may prove to be quite invaluable. Some companies offer accident and disability rider as a split up benefit as accident benefit and permanent disability benefit separately.

3. Waiver of Premium Rider This extra insurance rider protects your insurance policy from being canceled in certain situations, even if you are unable to pay the premium. Most policies limit the age you can use this rider to being older than 65. If, after you turn 65, you become disabled and are disabled for longer than six months, your premiums will be waived. Usually, the premiums you paid during the six months of disability will be reimbursed, but it depends upon the basic policy you have purchased. Once you are no longer disabled, you are required to resume your premium payments as before. The definition of being disabled varies from policy to policy so one must read over concerned insurance company's guidelines. Find out what qualifies as being disabled and how long one can retain the policy without paying the premiums. You should be familiar with all the details, restrictions, and responsibilities outlined within the policy before agreeing to the extra cost of the rider.

4. Family Income Benefit Rider - This rider guarantees that a family will continue receiving insured's monthly income in case of death. When purchasing a policy with this provision, one has to choose a length of time one would like to provide this security to the family. As the insured grows older the duration will decrease and eventually expire. Depending upon the situation, the beneficiaries can choose to receive the amount in a lump sum instead of in monthly increments. This is an invaluable life insurance supplement for families with single income source. In the event of the salaried individual's death, the family will not suddenly be cut off from all sources of income but, instead, will be able to depend upon reliable monthly payments of the death benefit.

5. Spouse's Insurance Rider - An extra policy option that, for a higher premium, offers coverage for your spouse and/or your children. IRDA has been contemplating stopping spouse rider.

6. Major Surgery Rider: A rider added to a life insurance policy to provide financial support in the event of surgical emergencies. A number of specified surgical procedures are covered under this rider and depending on the surgery the insured is paid from 50% to 25% of the sum assured. Unlike Critical illness rider this benefit is payable on more than one occasion when the life assured undergoes surgery. However the total benefit payable in case of all the procedures is restricted to a maximum of 50% of the sum assured. So if one gets 50% of sum assured for one major surgical procedure, then the rider terminates.

7. Renewal Provision (aka Guaranteed Insurability Rider) - When included in the life insurance policy, this provision guarantees the policy's renewability at the end of its term. If you decide to renew your policy, you will not be required to provide additional proof of your insurability. In order to take advantage of this provision, you are often required to renew your policy within a set number of days - you have fewer days to renew as you get older. This insurance rider may also expire at a certain age.

8. Guaranteed Insurability Option Rider: This rider allows one to buy additional insurance at different stages in life without having to furnish any further proof of insurability. The best advantage is that your health may have deteriorated but you still can get cover without showing proof of your health status.

9. Option to Purchase Paid Up Additions Rider: Available only on the Whole Life Participating Policy, this Rider allows one to increase the Sum Insured at any point of time, depending upon the needs and affordability. So you increase your risk protection and get additional savings within limits, without having to furnish any further proof of insurability.

10. Full Term Rider: As your age advances, your needs for managing risk will also increase. This Rider allows you to match your changing needs and buy additional life insurance for a limited time period at the lowest possible cost. One also has the flexibility to choose the duration of the coverage. You could choose between a 5-year term or a 10-year term or a term extending up to 60 years of age.