What is the Significance of Riders in Life Insurance?

Life insurance is a financial agreement between an insurance provider and a policyholder in which the insurance provider guarantees payment of a death benefit to named beneficiaries upon the policyholder’s death. In India, riders are additional benefits that can be added to a life insurance policy to provide additional coverage and protection. 

Insurance riders provide additional financial assistance during the policy tenure in the event of a specific occurrence, such as the policyholder getting affected due to a critical illness, disability, etc., It helps in managing the financial inconsistency, and the benefits are over and above the life cover. 

Here is a detail about the significance of add-on riders in life insurance in India

Importance of Rider in Insurance

Life insurance riders extend a range of benefits that insist on their significance on a standard life insurance plan. 

Increased financial assistance 

Riders can provide increased financial assistance to policyholders and their beneficiaries in case of an unexpected event during the policy tenure. 

For example, it can help the family manage the financial imbalances considering the routine expenses, debts, etc., when the policyholder is affected due to an illness, injury, or disability. 

Therefore, financial support can be used to manage the current crisis while ensuring the death benefit in the event of an unexpected death.

Customization 

Riders are an important aspect of life insurance in India as they provide additional protection and coverage for policyholders and their beneficiaries. Moreover, they can be customized to meet the specific needs and requirements of the policyholder, making the policy more comprehensive and tailored to their individual needs. 

For example, Tata AIA Life Insurance provides the riders with varied payout options, such as receiving the benefit as a lump sum, regular income stream, or as a combination of both options. Therefore, if the policyholder has purchased whole life insurance and the rider for critical illnesses with a regular income payout, the policyholder will receive a regular income for the defined period to manage the medical expenses if they are affected due to a critical illness such as cancer at any time of his life. 

Cost-effective 

Riders can be affordable for policyholders to increase their coverage and protection. In addition, they can be added to a life insurance policy for an additional cost, providing coverage benefits without the need to purchase a separate policy. 

Tax benefits

The premium paid towards life insurance riders also qualifies for tax benefits under Section 80C of the Income Tax Act. Additionally, policyholders can claim tax benefits on the premium paid towards certain health riders under Section 80D Act.

Common Add-on Rider Options

Some of the common insurance rider options available with life insurance policies in India are:

  1. Rider for accidental death benefit – Provides an additional death benefit in the event of the policyholder’s death due to an accident.
  2. Rider for critical or terminal illness – Provides a lump sum rider benefit in case the policyholder is diagnosed with a specified critical illness such as cancer, heart attack, and stroke.
  3. Rider for waiver of premium – Waives the premium payments in case the policyholder becomes disabled and unable to work.

Who Should Purchase The Rider Options?

Life insurance riders can be an appropriate option for many individuals, but they are particularly useful for those with a high probability of specific occurrences that can affect their health.

  1. People with a family history of critical illnesses such as cancer, heart attack, or stroke can consider purchasing a critical illness rider to provide a lump sum rider benefit in case of a diagnosis of a specified critical illness.
  2. People who work in physically demanding jobs or have a medical condition that increases their risk of disability can consider purchasing a waiver of premium rider to waive the premium payments in case of a disability.
  3. People living in accident-prone zones with a higher probability of meeting with an accident can purchase the accidental death benefit rider.

Conclusion

Riders are benefits that can be added to life insurance policies to provide additional coverage and protection. In addition, they can be customized to meet the specific needs of policyholders, making the policy more comprehensive and tailored to their individual needs. They are particularly useful for people with a high risk of accidents, having a family medical history of a critical illness or in a high-risk occupation.

Originally posted 2023-02-13 21:51:24.

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