Life insurance policies are essentially meant to cover the risk of early death. These act as financial support or income replacement tools. Despite this, one could face various uncertain and sudden risks in life and in such situations, even a term insurance plan could be of limited use. Simply buying a life insurance plan like a term insurance plan or a traditional endowment plan will not necessarily cover all risks.

There could be instances when a policyholder is disabled because of an accident or other event which could impact his or her earning capability. If premium payments are not made on time, the policy may become inoperative offering no coverage or benefits. There could also be hospital-related expenses during the policy tenure. 

At times, invoking the base policy might not be helpful or allowed. This could indicate the need for enhancement of existing policy coverage. If you are looking to enhance your policy but at a reduced cost, riders can be the ideal choice. Riders of life insurance plans come handy in various situations. Let's see what they are and how you can customise your life insurance policy using riders.

What Are Insurance Riders?

Riders come as additional benefits within any life insurance policy and can be used as an option by the policyholder. They may or may not be combined with the base/primary policy. In case they are attached, they can be used in case of occurrence of any specific event. These provide a financial cover which is over and above the original sum assured. 

Riders can be attached to any insurance plan, like a term plan, endowment plan, money back plan or unit-linked insurance plan. They help policyholders to customize their life insurance policy as per specific needs.

Types of riders

Accidental Death Benefit Rider (ADB): In case the policyholder dies due to an accident, the rider sum assured of the Accidental Death Benefit Rider is paid apart from the usual death benefit as covered in the policy. For instance, if the basic sum assured is Rs. 25 lakhs and the policyholder has chosen an ADB rider of Rs. 10 lakhs, the total claim amount adds up to Rs. 35 lakhs, in case of death due to an accident.

Accident and Accident Disability Benefit Rider (ADDB): Accidents do not always result in death but it could lead to disability. ADDB rider allows claim in case of death and in case of disability caused by an accident. Insurers generally cap the benefits under ADDB at Rs. 10 lakhs. Some insurers may allow this rider to become active only in case of total and permanent disability while others will activate it for temporary disability as well. In the case of disability, the ability of the policyholder to make premium payments could get hampered. Therefore, some insurers may offer a 'waiver of premium' in case of disability and the policy will continue despite the premiums not getting paid by the policyholder. This has to be clarified and confirmed in the terms and conditions of the policy.

Waiver of Premium Rider (WOP): This rider benefit can also be added as part of a WOP rider. In case of total and permanent disability due to an accident, all future premium payments under the basic policy and also the rider/s get waived till the end of the policy term or the death of the assured life, whichever is earlier.

Critical Illness Rider (CI): This rider option is also known as a major surgical assistant rider, dreaded disease rider, and other alternative names. It provides an additional cover in case the policyholder contracts a critical illness. Generally, the extra cover is the same as the sum assured within the base policy and is paid after the diagnosis of the illness. The illnesses covered could vary across insurers, but most offer cover for illnesses like cancer, coronary artery bypass, heart attack, kidney/renal failure, major organ transplant and paralytic stroke.

A CI Rider is an ideal choice for protecting against the possibility of critical illness instead of buying a separate health insurance plan for the same. A new policy will also mean a tedious claim settlement process. Further, the premium payment towards a new health insurance plan is always high as compared to a CI rider.

Before choosing this rider, always check the list of illnesses covered and also exclusions of the rider. A few insurers tend to terminate the base policy in case a claim is made on the rider. 

WOP Rider on CI: This rider applies to 4 types of critical illness conditions, which include, cancer, open chest CABG, first heart attack and stroke. In case the policyholder is diagnosed with either of these 4 critical illnesses, all future premium payments under the plan and riders (as applicable) get waived and the life cover along with other rider covers continue.

Women CI Rider: This rider aims to cover critical illnesses in women. In case a woman policyholder is diagnosed with either of the covered illnesses, a fixed percentage of the cover under the base plan (sum assured) is paid to the insured.

Income Benefit on Accidental Disability Rider (IB): Disability arising from an accident could impact the earning power of a policyholder. This rider provides monthly income security in case of an accidental disability. Typically, it provides a regular monthly income equivalent of 1% of the sum assured for a pre-determined and fixed period of 10 years.

Term Assurance Rider: Just as a term plan, this rider comes as an added benefit to the base policy. It enhances the risk cover at a minimal cost. Some insurers provide monthly pay-outs rather than a lump sum payment. In some plans, term assurance rider benefit could come with a cap of Rs. 25 lakhs after considering all policies that the policyholder has with the insurer.

Guaranteed Insurability Option Rider (GI): Insurance may require change as the policyholder grows older. With additional liabilities, one may want to reconsider one's life cover. The GI rider can be helpful in such cases. Adding the GI rider "insures your insurability" for the future as it gives the right to purchase extra insurance at various life stages, without the requirement of medical examination.

Some policies may allow riders only at the time of policy start date while many others allow them to be added during policy anniversary. A life insurance policy will not necessarily allow the addition of all the riders. Some of the riders could only be available in online insurance plans.

Include Add-Ons/Riders to Enhance the Coverage of your Insurance Policies

Adding a rider lets you customize a life insurance policy. It is helpful for those who wish to keep risk covers together or under the same insurer. However, one must evaluate the need for specific riders instead of opting for them just because they are available. Analyse your needs and choose the right riders that offer you ideal coverage.