RIDER

RIDER
• A rider is an insurance policy provision that adds benefits to or
amends the terms of a basic insurance policy. Riders provide insured
parties with options such as additional coverage, or they may even
restrict or limit coverage.
• There is an additional cost if a party decides to purchase a rider. Most
are low because they involve very little underwriting.
• A rider is also referred to as an insurance endorsement. It can be
added to policies that cover life, homes, autos, and rental units.
 Need for Rider
•Life Insurance plans are primarily meant to cover the risk of dying early. They, therefore, act as an income
replacement tool.
•However, one may face several other uncertain and unforeseen risks in life during which even a term
insurance plan may not be of much help. Merely buying a life insurance policy such as a term insurance
plan or a traditional endowment plan may not cover all risks.
•A policyholder may become disabled due to an accident or otherwise, thus impacting his or her earning
capacity. Failure of making timely premium payments towards the policy may render it inoperative and the
objective of buying the policy will not be met.
•There may be hospital-related costs during the tenure of the policy. Invoking the base policy may not help
or may not even be allowed. And, what if one wants to enhance the coverage in an existing plan at a lower
cost? Riders of life insurance plans may come handy in such situations. Let's see what are they and how
they benefit.
•Riders are additional benefits in a life insurance policy and are purely optional. They may or may not be
attached to the base/primary policy.
•When attached, they come into play on the occurrence of the specific event and provide a financial cover
over and above the basic sum assured.
•Riders may be attached to any insurance plan, be it a term plan, endowment plan, money back plan or
unit-linked insurance plan. They help one customize the life insurance policy according to one's needs.
Types of riders

Accidental Death Benefit Rider (ADB): In case of death due to an accident, the rider
sum assured of the Accidental Death Benefit Rider is payable in addition to the
normal death benefit. So, if the basic sum assured is Rs 25 lakh and the policyholder
has attached an ADB rider of Rs 10 lakh, the total claim amount will be Rs 35 lakh, if
the death occurs due to an accident.

Accident and Accident Disability Benefit Rider (ADDB): Accidents may not always
result in death but may leave the policyholder disabled. ADDB provides claim in case
of death and also in case of disability due to an accident. Insurers have a cap of
benefit under ADDB of, say, Rs 10 lakh. But check it before you go for it.
 Cont…..
• Waiver of Premium Rider (WOP): If not available as a benefit in ADDB, such a benefit may also be
added as a WOP rider. On total and permanent disablement due to an accident, all future
premiums both under the basic policy and the rider/s will be waived till the end of the term of the
rider or death of the assured life, if earlier.

• Women CI Rider: This rider covers critical illnesses pertaining to women. On being diagnosed with
any of the covered illnesses, a certain percentage of the base plan cover amount (sum assured) will
be paid.

• Income Benefit on Accidental Disability Rider (IB): Disability due to an accident may impact the
earnings capacity of a policyholder. Adding it provides monthly income security in the event of
accidental disability by typically providing a regular monthly income equal to 1 per cent of sum
assured for a fixed period of 10 years.
• Critical Illness Rider (CI): Also referred by other names such as major surgical assistant rider and dreaded
disease rider, it provides an additional cover on contracting a critical illness. In most cases, the extra cover is
equal to the sum assured on the base policy and is paid upon diagnosis of the illness. The illnesses covered
vary among insurers, but most insurers cover cancer, coronary artery bypass, heart attack, kidney/renal
failure, major organ transplant and paralytic .
Cont…..
• Term Assurance Rider: Similar to a term plan, it offers the benefit in the form of a rider.
Adding it to the base policy enhances the risk cover at a low-cost. Some insurers offer
monthly payouts instead of a lump sum payment. In some plans, term assurance rider benefit
may have a cap of Rs 25 lakh under all policies of the life assured with the insurer taken
together.

• Guaranteed Insurability Option Rider (GI): Insurance needs change as one grows old one may
want to enhance one's life cover. The GI rider comes handy in such a situation. Adding the GI
rider "insures your insurability" in the future by giving the right to purchase additional
insurance at different life stages, without further medical examination.
•Tax benefits
Premium paid towards the Critical Illness Benefit Rider or any other health-related rider will
qualify for tax benefits under Sec 80D, while riders such as accident and disability benefit
rider, accident benefit rider, and income benefit rider are eligible for tax benefits under Sec
80C.
•Watch outs
Some plans allow riders to be added only at the inception of the policy while a few others may
allow them to be added at policy are useful. However, evaluate the need for each specific
rider rather than opting for them merely because of low premium.
•Conclusion
Adding a rider may help you customize your life insurance policy. For those who want to keep
risk covers in one place or with a single insurer, such benefits are useful. However, evaluate
the need for each specific rider rather than opting for them merely because of low premium.