Choose riders on cover carefully

Insurers are pushing riders with term plans. You may not need most of these.

After a series of phone calls by her insurance agent, Vidya Vasudevan bought a critical illness rider with her term plan. For a 27-year-old, it’s of little use. “The agent pushed for it aggressively. It was cheap, too,” she explained.

We may all soon be at the receiving end of such calls. According to senior insurance executives, pushing riders with term plans are going to be their next focus area.

The reason: Term plans are preferred by many because it is the cheapest form of insurance. Financial planners often advise that a term policy, medical insurance and an accident policy should be enough for one person.

Riders are additional covers that one purchases with the policy. Charges for the riders are paid (the regulator has capped the premium at 30 per cent of the base policy) over the base premium. You can buy multiple riders on one base plan.

P V Subramanyam, a financial planner, said, “Buying a rider depends entirely on whether you have dependants or not. One should also look at exclusions carefully. For instance, HDFC Standard Life’s accident rider covers all types of accidents but ICICI Prudential Life does not accept accidents inside the house.”

25-35 years
You might just be starting your career. Since liabilities are minimum, life insurance may not be necessary. But if you have dependents, a term plan makes sense. In addition, you can take either accident death or accident and disability benefit rider.

For total and permanent disability, there are policies that provide payment of a proportion of the benefits to the insured person every year until he recovers. A waiver of premium benefit can also be provided. Manik Nangia, senior vice president and head (products), Max New York Life Insurance, said, “Accident riders can be taken either on an add-on basis or accelerated on the base plan. An insured (person) can get Rs 5 lakh from a Rs 10 lakh plan on diagnosis with the latter.”

Many insurers cater to women-specific health problems like Bajaj Allianz’s Mahila Gain. The rider covers pregnancy complications, breast cancer, child birth disorders and the like.

35-50 years
You may purchase a critical illness rider, along with an accident rider. Typically, a critical illness rider pays when diagnosed of the illnesses like cancer, coronary artery bypass, heart attack, kidney or renal failure, major organ transplant and paralytic stroke.

Experts especially endorse a ‘premium waiver rider’ for those with dependants. This rider is designed for those who have small children. Here, the future premiums on the base policy are waived if the insured becomes permanently disabled or loses his/her income/life as a result of injury or illness prior to a specified age.

Another option could be ‘family income benefit rider’. It provides death benefits and a monthly income (one per cent of the sum assured per month) to the beneficiary if the insured dies before the policy lapses.

A salaried individual could opt for a ‘hospital cash rider’, which takes care of the expenses like hospital room rent and other miscellaneous cost on hospitalisation.

50 years and above
It is advised not to go for any new plans or riders at a higher age, as it makes the plan much more expensive. However, ensure you have accident, health and life cover in this age.

If you wish to increase the sum assured for the term cover instead of buying a new policy, you can opt a term rider. “You can attach the rider with your savings plan to get an additional life cover, which will be more economical than a separate policy,” said Akshay Mehrotra, head-marketing, Bajaj Allianz Life Insurance.

Financial planners do not favour most riders except premium waiver and, in some cases, hospital cash riders/plans. They instead advise one policy with a large sum assured, say, Rs 50 lakh-1 crore to take care of all needs. “Go for a term plan after considering all your monetary requirements. You will not need to buy a rider,” said Kartik Jhaveri, director, Transcend Consulting.