To go for a rider or a cover

While riders come cheap, stand-alone policies provide comprehensive insurance

When Ashish Patkar wanted to buy an accidental death-benefit policy, he had the option to do so from a life insurer or a general one.

While the former offered it as a rider or extra benefit along with the base policy, the latter was selling it as a separate policy. As Patkar found, there are differences in the coverage and premium offered by the two. However, critical illness is a benefit common to both.

SOME DECIDING FACTORS

Riders cheaper than stand-alone policies Premiums for critical illness based on age and medical history Riders offer limited benefits compared to stand-alone policies Riders get discontinued when polices lapse or are surrendered

Riders cost less than standalone policies. It would cost Patkar just Rs 450 annually for buying an accidental death rider, offering a sum assured of Rs 5 lakh for 10 years. However, the same from a general insurer would cost him an annual Rs 3,000 for 5 years.

“Riders from life insurers do not have any expense loading on the rider premium as the same has already been claimed for the base policy. However, expense loading is charged separately in a standalone policy, making it expensive,” says, Rajeev Kumar, vice-president (products & pricing), Bharti Axa Life Insurance.

In case of critical illness riders and policies, age is a deciding factor for the premium you end up paying. “Those in the lower age group, or, with a clean medical history can buy it cheaper. However, even here, a rider will cost you less than a standalone policy,” says, Abhishek Bondia, business head, Secure Now Insurance Broker.

So, for a 25-year-old, when bought from a non-life insurer, a critical illness cover for five years will cost Rs 2,534 for coverage of Rs 5 lakh. In contrast, the same bought as a rider will cost Rs 1,355 for a period of 10 years.

Also, premiums for riders remain constant for the full term of the policy, unless specifically mentioned in the contract. Most non-life insurers offer polices on an annual, three-year, or, a maximum five-year period. So, the premium on your general insurance policy changing is likely to change more often.

According to insurance regulations, the sum assured for riders isn’t allowed to exceed that of the base plan. Also, rider premiums cannot exceed 30 per cent of the base premium.

Yet, within that, one could actually increase his/her sum assured using a rider. So, if a 35-year-old buys a policy offering a sum assured of Rs 25 lakh and also opts for an accidental death or disability rider of Rs 25 lakh, he will get Rs 50 lakh in the event of death due to an accident. This would come at an additional premium cost of about Rs 2,000 over the approximate Rs 12,000 he would pay for his base policy.

Other than cost, one also neds to look at the cover offered by a rider, as against a standalone policy. For instance, opting for an accidental death benefit comes into force only if the death has occurred due to an accident. But, the same policy from a general insurer might be more useful as it covers both partial and full disability in the event of an accident. Some life insurers have introduced a separate death and disability rider to meet the competition head on. However, even these cover just permanent partial and total disability.

In case of critical illness, both life and general insurers cover around 10 ailments. Again, product innovation has seen some life insurers introducing critical illness products covering almost 30-plus ailments. These are sold as standalone products and are rather expensive.

Both life and general insurers have mandatory medical tests only for first-time buyers of critical illness plans or riders.

But, one of the biggest disadvantages of buying a rider vis-à-vis a stand-alone policy is that riders automatically get discontinued when base policies are surrendered or lapse.