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Life insurance is one of the most preferred investment instruments that provide life cover under unfortunate circumstances. What if insurance could adapt the changing needs without requiring a new policy? This is possible through the policy riders. In simple terms, it is the additional benefits that policyholder can avail to increase the coverage of their existing policy. In this blog, we will discuss the overall impact of policy riders on life insurance in detail.
Key Takeaways
Adding riders to life insurance policies increases financial protection for policyholders and their loved ones.
Riders allow policyholders to tailor their policies without significantly increasing premiums.
Certain riders offer tax deductions under Sections 80C and 80D of the Income Tax Act.
Policyholders can choose only the necessary riders, avoiding unnecessary costs.
Riders, such as waiver of premium and family income benefits provide additional security in unforeseen situations.
Different Types of Life Insurance Riders
Before jumping into the benefits or impact, let's understand its types in detail.
Accidental Death Rider: An accidental death is the additional death benefit that is given to the insurer’s family if they die due to the accident. The amount is equivalent to the face amount of the original policy, which doubles the benefit. Hence, it is also known as a double indemnity rider.
This policy is ideal for sole earners because the benefit will cover surviving family expenses.
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Waiver Premium Rider: Under this rider, future premiums are waived if the breadwinner loses their income due to an injury or illness before a specific age. In these circumstances, the policyholder does not pay the premium until they are ready to work again.
Family Income Benefit Rider: In case of insurer dies, this rider will provide a regular flow of income to the insured family members. The benefit of this rider is to provide financial help to the surviving member in the difficult phase of life.
Child Term Rider: It is an add-on feature to a life insurance policy that provides coverage for your child. It ensures financial protection for your child in case of an unfortunate event, offering a sum assured in the event of the policyholder’s death. The coverage is 5 times more than the original amount without the need for medical exams.
Did You Know?
Family income benefit riders are generally purchased by individuals who are the sole breadwinners of their families.
Benefits of Adding Policy Riders to Base Insurance
Policy riders can significantly impact a life insurance policy over time. Here’s how they influence policy:
Enhanced Coverage: Adding riders to policyholder's base life insurance policy enhances their overall protection. For example, if the base life insurance policy has an assured benefit of ₹1 crore, a rider can add ₹30 lakhs. This addition provides a great impact in unavoidable circumstances such as critical illness, accidental death and much more.
Affordable Premium: Policyholders can keep their life insurance premiums affordable by strategically adding riders instead of purchasing multiple separate policies. Selecting only essential riders allows them to customise their policy without overspending. For example, instead of buying separate accident or critical illness insurance, they can add a rider to their base policy and get extra protection while keeping premiums low.
Tax Benefits: Certain riders allow policyholders to avail of tax benefits. Critical illness and hospitalisation are covered under 80D deductions, while accidental death and premium waivers are covered under 80C deductions of the Income Tax Act.
Flexible Choices: Insurers offer flexible rider options to cover specific emergencies and financial uncertainties. Policyholders do not need to opt for all riders, which could lead to higher premiums. Instead, they can select only the necessary riders to ensure financial protection for themselves and their loved ones in case of unforeseen events.
Glossary
Policy Rider: An optional add-on to a life insurance policy that provides additional benefits beyond the standard coverage.
Accidental Death Benefit: An additional sum paid to the nominee if the insured dies due to an accident.
Term Insurance: A life insurance policy that covers a specific period and pays a death benefit if the insured dies during that time.
Premium Wavier: An additional feature that lets policyholders stop paying premiums if they become disabled or unable to earn income.
Critical Illness Rider: Coverage for severe health conditions like cancer, heart attack, or stroke, offering financial support.
FAQs
Policy riders are optional add-ons that enhance coverage, providing extra benefits beyond the basic policy.
The cost depends on the type and number of riders. Some may have a slight increase, while others can raise premiums considerably.
Yes, most insurers allow policyholders to remove riders, though terms and conditions may apply.
The most beneficial riders depend on individual needs. Critical illness and waiver of premium riders are commonly chosen.
Riders can enhance claim benefits but may also require additional documentation during the claims process.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
