Term Insurance Riders – Should you consider them?
Term insurance plans comes with low premiums. However there are many criticisms that these plans are good only in case policy holder dies and does not provide flexibility or returns. To make it attractive, Insurance companies are offering Term Insurance Riders which would be add-on benefits, however comes with additional premiums. If your insurance broker is trying to mis-sell you his money back plans or endowment plans or insurance investment plans considering some of the minor dis-advantages of term insurance plans, you should read this article. What are the term insurance riders offered by insurance companies? Why should you opt them? How these riders in term insurance plans would provide enhanced benefits with small additional premiums?
5 Term Insurance Riders –Should you consider them?
There are basically 5 term insurance riders which would provide flexibility apart from covering basic sum assured. I would also provide why you should consider such term insurance riders. While some are offered directly part of term insurance with additional premium, a few of them are provided as additional rider plans and you need to opt them seperately.
1) Accident Death Benefit Rider
Term insurance with accident death would provide enhanced cover to your sum assured. In case you met with accident, your family would get additional amount apart from basic sum assured. Currently, most of the insurance companies are offering accident death benefit rider as part of their term insurance plans.
Let me explain with example.
Mr.Ravi has taken Rs 50 Lakhs term insurance and accident death benefit of Rs 25 Lakhs. In case Ravi had normal death, his family would get Rs 50 Lakhs. However in case Ravi dies due to accident, his family would get Rs 75 Lakhs (sum assured of Rs 50 Lakhs + Rs 25 Lakhs as accidental death benefit). With small additional premium, Ravi can get this enhanced accident death benefit rider.
2) Critical Illness Rider
These days this rider is becoming important for every one. In case you are diagnosed with any critical illness a lump sum amount would be paid under this benefit. There are several term insurance policies which are offered with critical illness rider for diseases kidney failure, heart attack, cancer etc.,One need to be careful in choosing a term insurance policy which offers critical illness riders. One should understand what diseases are being covered as part of the term insurance plan. Another point is one need to see terms and conditions of such critical illness rider benefits. Some term policies would get terminated once critical illness is diagnosed. You should stay away from such term insurance riders.
One example is, Birla Sunlife offers BSLI Critical illness rider which pays 100% of critical illness rider benefit if diagnosed with First Heart Attack, Cancer, Stroke, major organ transplant.
Another example is from Kotak Life is about Kotak Critical Illness Benefit (CIB). Portion of Basic Sum Assured (maximum 50% of Basic Sum Assured) payable on admission of a claim on a critical illness with maximum ceiling of Rs 20 Lakhs.
3) Premium Waiver Benefit Rider
This is another important term insurance rider, one should keep on their radar when buying term insurance. This rider would help you to waive future premiums in case your income is stopped or you are physically disabled and not able to work to earn money. This premium waiver rider would benefit in such instances. In term plans offering premium waiver beneifit rider, in case of physically disabled or income stopped, your future premiums would be waived, however your term insurance would continue till the end of the tenure without any disruptions. This way your family is secured and you need not pay any future premiums too.
Above premium waiver benefit riders are provided by most of the insurance companies.
4) Income Benefit Rider
Term insurance with income benefit rider would help your family to get regular income after your death apart from basic sum assured. This income benefit would be paid either every month or every quarter to nominee for a period of 8 to 10 years. Your family need not struggle for children education and survival for those many years. You should opt this income benefit rider in term insurance in case you are the whole and sole bread earner in the house.
e.g. Reliance life insurance offers income benefit rider, where if policy holder dies or becomes permanent disabled due to accident, nominee would get 1% of rider sum assured as income every month.
5) Permanent and Partial disability benefit rider
In case are met with accident / diagnosed with a disease and are either permanent or partial disabled, this rider would be helpful to you. In term insurance which is offering this benefit rider, you would get a pre-defined %age of sum assured as and when you are either permanent or partial disabled as per terms and conditions. This would generally help you to replace your regular income as it would have got stopped due to your permanent or partial disability. In current life style where we run day in, day out , I feel one may have permanent or partial disability rider to ensure that our family does not suffer in case income earning member is permanent or partial disabled.
Conclusion: I agree that all these riders are not offered by all insurance companies with single term plan or single critical illness rider. But one can get benefit by opting few of them while buying term plan or buy one of them separately with small premiums. This would enhance the risk cover with small additional premium and ensure that family does not suffer due to loss of the income earning person.
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Term Insurance Riders – Should you consider them?