Buy life insurance riders that align with your financial goals, risks

Understand exclusions, waiting periods, survival period requirements, and claim triggers before purchase

More Indian families are opting for insurance riders that offer protection against disability, critical illness (CI) and income loss, according to Policybazaar. South India leads this shift, with 45–47 per cent of customers purchasing at least one rider, twice the adoption seen in the northern markets.

 

Riders are optional add-ons that expand the scope of a life insurance policy. “They offer extra protection against risks such as accidents or illnesses,” says Maneesh Mishra, chief product and marketing officer, Bandhan Life.

 

Expand coverage at low cost

 

Riders are cost-effective. “Rider premiums are significantly lower than those of standalone policies for the same benefits,” says Varun Agarwal, business head, term insurance, Policybazaar.com.

 

Riders also offer customisation and simplicity. “A rider lets customers tailor coverage to specific risks. They also offer convenience by combining multiple covers — life insurance, critical illness and personal accident — into one policy,” says Agarwal. Mishra adds that they also offer tax benefits under the old tax regime.

 

Standalone policies vs riders

 

Standalone policies are more suitable when customers require higher or more specialised coverage than a rider can provide. “A policy specifically designed to cover a certain critical illness, for instance, will provide more flexibility, more comprehensive coverage than a CI rider, and possibly a higher sum assured,” says Mishra.

 

Riders have another limitation: their premium cannot exceed the base policy premiums, thereby limiting the level of coverage they can offer. 

 

Sum insured, premium and renewability

 

The right sum insured for riders depends on various factors. “Coverage should be chosen after considering income, loans, health issues, family responsibilities, lifestyle and future goals,” says Casparus J H Kromhout, managing director and chief executive officer, Shriram Life Insurance.

 

“For critical illness, the benefit amount should consider treatment and recovery costs, and medical inflation,” says Vikas Gupta, chief product officer, ICICI Prudential Life Insurance Company.

 

Aditya Mall, appointed actuary, Generali Central Life Insurance, adds that people who travel frequently or have high-mobility roles may need higher accidental cover.

 

Rider premiums are usually fixed for the entire term, except for the CI rider. “The premium for the CI rider is subject to revision by the insurer every five years from the policy inception date,” says Agarwal.

 

Riders can have different terms. “Most riders are renewable only up to a certain age, or for a limited period, and do not necessarily extend up to the end of the base policy term. A waiver of premium rider, for instance, generally ends when the premium-paying term is attained,” says Mishra.

 

Factors to consider during purchase

 

Make sure the rider adds value rather than just adding to cost. Check what is covered and what is excluded. “Customers need to examine waiting periods and survival period clauses, especially for CI riders,” says Mall. He adds that customers must understand whether premiums are constant or may increase over time, and whether the payout will be in a lump sum or instalments.

 

Gupta adds that customers must check whether the payout is linked to diagnosis, disability or a specific event.

 

Riders one should purchase

 

Accident Benefit Rider provides an additional payout if death occurs due to an accident. “It also pays the sum assured and waives future premiums for the main policy if the policyholder becomes totally and permanently disabled,” says Kromhout. Mall adds that it is useful for people with high travel or occupational risk.

 

Critical Illness Plus Rider pays 100 per cent of the rider sum assured on diagnosis of listed critical illnesses, helping cover medical costs and loss of income. Diagnosis proof is enough to make a claim.

 

Waiver of Premium Rider ensures the main policy continues even if the policyholder becomes disabled or critically ill.

 

Term Rider adds extra cover over the base policy and is especially useful for those purchasing savings or unit-linked insurance plans.

 

Do’s and don’ts

 

Riders must align with financial goals and personal risks. “Do not over-insure by selecting riders without assessing real needs,” says Kromhout. Mall adds that customers must ensure premiums fit into their long-term budget. Customers must avoid delaying the purchase of relevant riders. Finally, do not hide or falsify details in the proposal form.

The writer is a Mumbai-based independent journalist