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We don’t want to settle for plain things in life. We add something to them to enhance the utility derived from them. This behavior is exhibited even in the simplest of things we buy, for example, very few people enjoy plain vanilla ice cream. Vanilla ice cream is often eaten by adding nuts and chocolate sauce over it. Similarly, a plain cheese pizza is not very palatable for many unless extra toppings are added over it.
The quest to customize things according to our whims is really deep rooted be it our food, cars, bikes, interior décor or even financial instruments. The extra toppings provided by life insurance companies to enhance benefits of their policies are called riders. Like other forms of customization, Riders bear a cost. By paying extra Premium one can attach riders to their life insurance plans
Life insurance riders enhance the financial Coverage over and above the basic sum Assured in a life insurance Policy and come into play in case of a specific eventuality.
Under Critical Illness rider the insurance company pays a specific lump sum amount or regular periodic payout to the Policyholder on contracting a disease mentioned in the list of critical diseases. A range of diseases are classified as critical diseases like heart attack, cancer, stroke, kidney failure, paralysis, Parkinson’s disease, Multiple sclerosis etc. When a person contracts such disease his working capacity can be compromised and heavy treatment cost is also needed. Thus, the insurance company pays a specified percentage of the Sum Assured when intimated about such diagnosis. The remaining sum assured after deducting the amount paid under critical illness rider is paid at Maturity or specified eventuality.
Bodily disability can happen because of an accident. Disability might be permanent or temporary. It impairs or affects the work of an individual in many cases. For example, example if a writer loses his eyes he won’t be able to perform his profession. Under this rider the insurance company pays a regular monthly income to the policyholder on acquiring a disability for up to 10 years. The monthly payout is usually 1% of the sum assured.
Death of a family member is a hard thing to bear. It is even harder if it is because of an Accident as accidental death is usually sudden. The family does not even get time to ready itself for it. Under accidental death benefit the insurance company pays up to double the sum assured in case of death due to accident. For example, if the sum assured of a policy is INR 50 lacs and the policyholder dies because of accident during the currency of the policy, the nominee would receive INR 1 crore as death benefit.
Under a Term rider the nominee of the policyholder gets monthly income along with the lump-sum proceeds. Many families prefer to receive a monthly income over a lump sum amount because of the fear that the lump might get spent by them. In order to have a long term security they prefer to have regular monthly income over a period of time
A Waiver of premium rider in an insurance policy is a clause that says the insurance company would write off or will not require the Insured to pay future premiums to maintain the policy under certain conditions like death or disability of the policyholder. The policy continues as it is without any obligation on the insured or nominee to pay future premiums.
Policyholders can attach or top up any of the life insurance plans with riders be it a term plan, endowment or even ULIP. The policyholder should evaluate the needs and requirements of the family and based on those select what types of riders they should have on their life insurance plan.