Riders on Term Insurance Plans

Riders in Insurance

IRDAI defines riders as “ add-on options (Benefits) that can be added to a basic Life Insurance Policy – to provide additional coverage”.  Riders can help to customize your insurance policy based on your personal needs and coverage requirement. You can take riders at the time of taking the basic policy, however, some insurance companies allow to opt for them during the tenure of the policy. Riders come with a cost, so they increase the total premium to be paid on the policy. Some riders are in-built in the base policy, while others are offered as stand-alone from the base policy.

The premium paid on riders is added to the base premium of the policy and, thereby, it becomes eligible for deduction under section 80C.

There are several riders available on all types of insurance policies. Here, we will discuss the ones that are available on a term insurance plan and recommend which one should you take.

Term Insurance Riders

Term insurance is the purest form of insurance. That is, there is only death benefit – if the policyholder dies, the sum assured is given to the nominee. There are no maturity or survival benefits in terms of returns or bonus. When a term is bought with rider(s), the nominee gets an extra sum over and above the sum assured in case of policyholder’s death.

Let’s understand which riders a policyholder can opt with the a term insurance policy. A detailed know-how of these riders would help you to take a wise decision.

1. Accidental Death Benefit (ADB)

Under this rider, if the life insured dies in an accident, the nominee will get an additional amount, apart from the sum assured. Now, most term insurance buyers often think unless they take this rider, the nominee will not get the sum assured in the eventuality of policyholder’s death due to accident. Well, the fact is that term insurance covers accidental death, whether this rider is taken or not.

Here is an example. Shlok purchased a term insurance policy of Rs30 lakhs. His friend Ashok purchased the same policy for the same amount, but with an ADB rider of Rs10 lakhs. Now, in the unfortunate event of their death in a road accident, Shlok’s nominee will get only Rs30 lakhs while Ashok’s nominee will get Rs40 lakhs (Rs30 lakhs sum assured + Rs10 lakhs ADB amount).

2. Critical Illness Benefit (CIB)

This rider gives an additional amount (usually equal to sum assured) in case the life insured is diagnosed with a critical illness as specified in the policy document. Generally, most insurance companies cover cancer, heart attack, kidney failure, stroke, major organ failure, paralysis and Coronary Artery Bypass Graft Surgery (CABG), among a few others scope of critical illnesses.

CIB can be taken as a standalone rider or as an accelerated rider. In standalone CIB rider, when the life insured is diagnosed with a disease mentioned in the document, then a lump sum amount is paid to the life insured and the policy continues with the base sum assured or lesser coverage amount. In an accelerated CIB rider, the death benefit (even if the life insured is alive) is paid and the policy is terminated. So, when you are taking a CIB on your term policy, do ensure that you know whether you are opting for a standalone or an accelerated rider.

 

3. Disability Income Benefit (DIB)

The basic premise of term insurance plan is based on the fact that the sum assured is paid if and only the life insured dies. However, if a DIB rider is taken, the life insured will get a regular income from his policy in case he becomes disabled. Hence, this rider is also known as Partial and Permanent Disability rider.

This rider assumes that the life insured is no longer in physical capacity to earn due to disability which can be partial or total. The policyholder a fixed percentage of the sum assured at regular intervals for a fixed period of time to replace the loss of his income. Depending on the severity of disability, the policyholder may also get full sum assured as lumpsum and the policy will get terminated.

The definition of disability varies from one company to another. Please ensure you understand the definition before taking this rider.

Many insurance companies club this rider with ADB rider, so do your research properly.

4. Waiver of Premium (WOP)

If the life insured is diagnosed with a critical illness or becomes disabled, he might be in a position to pay future premiums as his regular income will cease to generate. The insurance company will waive of the payment of future premiums without changing the sum assured and other features of the policy. So, not only there is a waiver of premium during the survival of the life insured, there will be also death benefit for the nominee in case of life insured’s death.

We compared the riders offered on term plans by 14 life insurance companies. Surprisingly, only 7 insurance companies offer riders. Let’s take a look.

1. Aegon Religare iTerm

The term plan from Aegon Religare offers four riders:

• Critical illnesses benefit for cancer, open chest CABG, first heart attack and stroke
• Waiver of premium benefit on critical illnesses listed above
• Women critical illness benefit for women only.
• Disability income benefit where life insured becomes permanently disabled due to sickness or accident.

Even if you don’t take the critical illness rider, this term plan provides an in-built benefit on the diagnosis of any terminal illness, an amount equal to 25% of the base sum assured will be paid subject to maximum of `100 lakhs and the death benefit will be reduced by an amount equal to the benefit paid under this clause. No premium will be charged after company accepts the terminal illness claim.

2. Bharti Axa eProtect

The term plan from Bharti Axa offers two riders:

• Accidental death benefit
• Hospital cash benefit which allows payment of a fixed benefit for each day of hospitalisation. It also offers a fixed amount benefit if you are admitted in an Intensive Care Unit or a lumpsum benefit in case of surgery.

3. HDFC Life Click 2 Protect Plus

The term plan from HDFC Life offers two riders:

• Accidental death benefit
• Income benefit on accidental disability which offers monthly Income of 1% of the rider sum assured in the event of total permanent disability due to an accident for a fixed period of 10 years.

4. ICICI Prudential iProtect Smart

The term plan from ICICI Prudential offers three riders:

• Accidental death benefit
• Critical illness benefit
• Waiver of premium on permanent disability due to an accident

However, accidental death benefit and waiver of premium are in-built in the plan. There is another an in-built terminal illness benefit, which gives the death benefit on diagnosis of terminal illness. After the claim of this benefit, the policy terminates.

5. Kotak Life e-Term

The term plan from Kotak offers two riders:

• Accidental death benefit
• Waiver of premium benefit in case of permanent disability.

The waiver of premium is in-built in the plan.

6. Max Life Online Term Plan

The term plan from Max Life offers one single rider:

• Comprehensive accident death benefit which provides additional protection benefit in the event of an accident, leading to an unfortunate dismemberment (listed impairments) or death. The benefits under this riderare payable over and above the base plan benefits.

 

7. SBI Life eShield

The term plan from Max Life offers only one rider:

• Accidental death benefit

Comparison Chart

Which Rider is the Best for You?

The type of rider and the sum assured on the rider you take depends on your age, occupation, frequency of travel and medical history. Your financial capacity to pay extra premium over and above the base premium should also be taken into consideration.

We always recommend simple term plans with NO riders. For critical illness and accident coverage it might be prudent to compare the price of these riders with personal accident insurance as well as critical illness plans sold separately by many general insurers like Bajaj Allianz or Apollo Munich or HDFC Ergo.