High value riding on low cost

High value riding on low cost

A life insurance policy covers your life, offering benefits in case of death. Riders are a good way of enhancing a policy without having to pay as much. They not only help spread the risk but can be selected to suit specific needs.

A life insurance policy covers your life, offering benefits in case of death or even if you survive the term of the policy. However, the policy doesn’t provide for medical emergencies —unless you opt for a rider. Riders act as additional benefits that can be attached to the main policy and help spread the risk base.

The cost of a rider
RiderIndicative cost (Rs)
Accident rider100-200
Critical illness250 onwards
Surgical assistance200-500
Disability benefit100-300
Indicative annual premiums for Rs 1 lakh sum assured for a 30-year-old for a 15-year tenure attached to an endowment policy

You can take riders with any life insurance policy, be it traditional or unitlinked. The typical riders include critical illness benefit, waiver of premium benefit, level-term covers and accident and disability benefits, but you can opt for customised riders that are specific to insurers and are offered to make their products stand out. Some insurers offer riders at the time of taking the policy, while others let you do it at a later date, though the cost for the latter may be higher depending on your health and age.

Riders offer high value at a low cost and provide extra protection without the need for a second policy. As the premium for the rider goes entirely towards the cost of the risk cover rather than savings, the premium on a rider tends to be lower than that for the basic policy. Besides, the administrative cost goes down when a base policy is maintained along with a rider cover.

Riders are not complex, but choosing the right one is not easy because of the wide choice on offer—health riders, which combine critical illness and hospitalisation cash benefits, effectively pay for your hospital stay; the waiver of premium rider in case of disability or skipping of premium during illness, and the gender-specific rider that caters to specific health ailments.

Selection is also difficult as each insurer offers at least three variants and agents try to sell as many as allowed. However, the Insurance Regulatory and Development Authority stipulates that the premium for all riders can’t exceed 30% of the premium on the base policy. Also, the tenure of the rider and the base policy should be the same. So riders make for a wise option if you pick those that suit your needs.

• Riders at different stages of life add more value to the life cover.

• Add disability, critical illness and accident riders at an early age.

• In middle age, take waiver of premium rider, especially while taking a plan for a child.

• Add critical illness and term insurance riders with longterm plans, including term policies.