Ashish Gupta, TNN Dec 30, 2007, 04.39am IST
Riders are an important and integral part of insurance policies. A policy rider in an insurance policy represents a provision or modification to an existing insurance policy that provides additional coverage to an insurance policy. Riders on the insurance contract provide additional protection against risk.
Normally, a term life policy lapses when one stops paying premiums. A waiver of premium rider is a rider that lets one stop paying premiums for a policy if you become disabled for a sustained period of time before reaching age 60. The rider keeps your policy active by paying premiums for the insured. Riders if selected properly based on ones insurance needs can add great value to the life cover of the insured.
For example, a person who already has an existing accidental insurance policy for Rs 30 lacs and has no liability may not need to include the accidental death benefit with his policy.
However, if he is inadequately covered for life insurance and is financially incapable of taking a larger cover, then he may opt for the accidental death benefit because the accidental death benefit rider will cost much less than the additional cover required and will provide additional monetary protection to his survivors in case of his unfortunate accidental death.
Policy riders are sold separately from insurance policies. One can buy a basic insurance policy and add riders to the policy to include extra protection. The additional risks covered may include premium waiver in case of death, additional accidental death cover, disability cover, critical illness cover, hospitalisation benefits, loss of employment cover, accelerated death benefit etc.
A double indemnity rider pays twice the amount of the policy if one dies accidentally. One need to choose
the riders that are suited to ones specific needs. The policyholders should avoid those riders to the policy, which are least useful to them and include those that may be critically important to their needs.
The riders provide low cost pure risk cover to the insured. These need to be bought specifically along with the base policy at the time of inception of the policy. The insured cannot keep adding riders through the tenure of the policy. The premium on the riders is lower than the same cover bought as a specific policy. This is because of the reason that the insurance company's administration costs are lower.
One is required to pay additional premium for additional riders. These additional charges are normally lower than the individual policies that provide the same benefits. In case the event that has been insured against through the coverage occurs, the insured or his beneficiaries would be paid the rider benefits. One should evaluate whether a policy rider offers additional protection that is worth the extra expense. Insurers have in-built riders attached to their basic policy.
Some have flexible-plans, which can be designed to suit customer needs. These riders add to the cost of the policyholder, but assure him of an additional sumassured in case of certain eventualities covered by the rider. In case of flexi-plans, the customer has an option to attach the desired riders to the basic policy, which could be either endowment, money-back, whole life or term policy. These customized plans are much better than the ready-made plans with the in-built riders.
The need of a rider with a life insurance policy depends on the insuranceseeker's existing insurance, as well as additional medical and non-life covers available with him. Also it depends on his financial condition, his savings component and his liabilities.