Buy riders for additional cover

Riders are additional benefits that can be purchased with a life insurance policy to enhance your insurance cover. These are extra features that you can add to your basic insurance policy to protect yourself against a host of unexpected tragedies. Riders typically cost extra in premium and add value, flexibility as well as safety to the core coverage during the life of the policy. All life insurance riders qualify for tax benefit under Section 80C, subject to the overall limit of Rs 1.5 lakh. Riders can be attached to all types of insurance policies - endowment, moneyback, whole life and unit linked insurance plans (ULIPs). While riders can be added any time to your policy, it is wise to opt for them while buying the main policy.

How much do they cost?
Most riders are relatively inexpensive. A rider generally costs around 5-10 per cent of the total premium you pay for your basic cover. There is no limit to the number of riders that you may attach to your basic cover, but the premium on all the riders together should not exceed 30 per cent of your base premium. However, keep in mind that when you take multiple riders, your premium amount escalates and this may pinch your pocket.

How beneficial are riders?
Let's say you buy a life insurance policy with a sum assured of Rs 5 lakh, which has an accidental death benefit rider. In case you die a normal death, your nominee will get the sum assured as the death benefit. But if you die in an accident, you might get up to double the sum assured. The chances of you dying in an accident are low, which is why you pay a small premium in addition to the basic premium that you pay for your life insurance policy.

Types of riders
Here is a list of the most common life insurance riders that you may come across while buying a base life insurance policy. Please note, this is not a complete list.

Accidental death benefit: It is the most common rider. If the policyholder dies in an accident during the term of the life insurance policy, an additional amount less than or equal to the sum assured is payable to the nominee.

Critical illness benefit: This is the second most useful rider that will take care of your medical expenses in the event of a critical disease. Every insurance company has a list of illnesses that come under the policy. If you are diagnosed with one of them during the term of the policy, the insurance company will pay a lump sum amount.

Waiver of premium: This rider will override the insured's need to make payment of future premiums in the event that he becomes either permanently disabled or loses income as a result of an accident or illness. So your premiums are waived but your cover still continues.

Disability income: The disability income rider guarantees a monthly income from the insurance company if the policyholder becomes totally and permanently disabled, for as long as the disability lasts. Beware of exclusions and inclusions. Make sure that you check with the insurance company not only the terms and conditions of its riders, but also the specific meanings of the words that the insurance company uses to describe situations in which the rider provides benefits.

Why are riders popular?
The main reason for their popularity is that riders offer high value at a low cost, and they offer extra protection without you having to buy a second policy. While most life insurance policies are standardised and may not give you the liberty to modify them according to your individual needs, these riders empower you with much-needed control over your changing life situations.

Finding the best riders
Riders are not very complex but many insurance buyers find it extremely difficult to choose the right rider due to two reasons. One, a large number of riders available at affordable prices make it difficult to choose the right ones. Two, insurance agents try to sell as many riders as possible as they make more money for themselves. The solution to the problem: do not buy a rider just for the sake of it. Always ask yourself whether you really need the extra cover. For example, if you travel a lot by road or if you are into a job that requires a lot of travelling, it would be wise to buy an accidental death benefit rider.

Points to remember

• Riders add extra protection over and above the base policy
• For a small price, you get a high-value, low-probability benefit
• They are cheaper than the base policy premium
• Various types of riders are available in the market to suit individual needs
• Understand and evaluate your needs before buying a rider
• Be aware of the terms and conditions attached to them