Most of us already know the term insurance meaning, i.e. pure life coverage for a specific duration with the payout of a sum assured to the nominee in case of the policyholder’s demise within this period. But did you know that you can enhance your term insurance with suitable riders? Here’s looking closely at some of these riders and how they accentuate your policy.
What are term insurance riders?
While purchasing online term insurance, you will get an option to select riders. These are additional coverage plans or add-ons that can be linked to your term insurance plan, enhancing its overall coverage. In addition, riders offer added advantages over and above the sum assured payout in case of the policyholder’s demise.
A majority of term insurance plans come with options for adding riders, although their features, terms and conditions, and costs may differ, depending upon the policy and insurance company, among other factors. Some riders are integrated into term plans as part of the overall package. At the same time, some have to be separately purchased by the policyholder by paying a nominal extra premium for the same. In most cases, premiums paid for riders are comparatively lower than those paid for term plans. The sum assured amounts of riders is also lower than insurance coverage.
To sum it up, for an additional fee, riders can extend the benefits of a term insurance policy with additional coverage options. They are made to offer policyholders extra benefits or protection.
How do riders function for term insurance policies?
You begin by purchasing a term insurance policy: Choose your tenure and the coverage amount while keeping an eye on the premium. Then, you can add riders to the policy based on your budget and specific requirements. Riders, such as accidental death, waiver of premium, and income benefit, are some examples.
These riders will then provide additional benefits or coverage to the policyholder. For example, adding an accidental death rider to your term insurance policy will provide additional benefits in the event of accidental death. As a result, you will agree to pay an additional premium for the rider you choose, which is over and above the premium for the basic term insurance policy.
Some common types of term insurance riders
Various kinds of riders can be chosen for your term insurance policy. Some of the available options include the following:
- Accidental Death- If the policyholder dies within the policy tenure owing to an accident or mishap, then the insurer will pay an extra sum assured to the policyholder’s nominee. This is usually worked out as a percentage of the original term plan’s sum assured. The percentage of this extra amount varies across insurance companies, and there could also be a limit on the maximum sum assured amount for the rider. The policy premium will, however, remain fixed for the whole duration. The rider only applies if there is an accident and the insured person’s demise owing to the same. If the policyholder dies for any other reason, then the nominee will get only the sum assured of the basic term plan.
- Critical Illness- This rider safeguards the policyholder from the financial impact of any major and life-threatening ailment, such as a heart attack, cancer, paralysis, kidney failure, and more. This illness would otherwise require the policyholder to spend a lot on medical treatment. The rider ensures compensation with a lump sum payout in case of diagnosis of any such pre-listed ailment. Policyholders should go through the policy documents with care, learning more about the illnesses listed in the same.
- Accelerated Death Benefit- If this rider is chosen and the policyholder has already been diagnosed with any terminal ailment, then it enables the family members to get a portion of the sum assured beforehand for taking care of medical costs. This rider is less costly and mentions the percentage of the sum assured that will be given in advance in case any such situation arises. The remainder will be paid out to the nominee upon the policyholder’s demise within the policy period.
- Accidental Partial/Total Disability Benefit- This rider covers financial risks arising from permanent or partial disability due to an accident. Insurance companies pay out a specific percentage of the sum assured amount for a 5-10-year period after the mishap in question. They replace the lost income of the disabled policyholder in this period. They are also combined with accidental death riders for many policies.
- Waiver Of Premium- This rider is useful if the policyholder cannot pay premiums due to a loss of income or a disability, among other reasons. The policy will stay active, while the insurance company will waive future premiums. This rider ensures that the policy does not lapse and keeps the life coverage of the policyholder intact.
- Income Benefit- This rider ensures a steady income for the family in case of the demise of the policyholder. There is extra income paid to the family each year for a 5-10-year period after the insured person’s death, aside from the basic sum assured amount in the term insurance plan.
Policyholders can beef up their term insurance policies with suitable riders. After all, no one can accurately predict the future, and it is always best to stay prepared for as many contingencies as possible.
