Use riders of an insurance plan to increase coverage

To ensure that you are adequately insured against any untoward mishaps in the future, you don’t need to buy too many different insurance policies that your agent recommends to you for earning higher commission. Be a smart investor and check out the riders or attachments offered by your insurance company to expand the scope and coverage of your insurance policy.

Riders are attached to a base policy and provide additional benefit at relatively lower premium. The premium charged for a rider is much lower compared with a standalone policy because the administrative expenses are loaded in the base plan and, hence, not loaded again for riders. This makes riders relatively cheaper.

Riders cover risks arising out of specific situations such as accidental death, critical illness and permanent disability, among others. In the unfortunate occurrence of the event covered by a rider, the insured gets the promised rider benefit. Rider benefits are in addition to insurance sum assured. Say for instance, the life insured meets with an accidental death, the insurance payout will include both the sum assured as well as the rider benefit. The rider premium will depend on the rider sum assured, age of the insured, insured’s health condition and other factors.

Rituraj Bhattacharya, head of market management, Bajaj Allianz Life Insurance, said, “Riders allow you to enhance your cover qualitatively and quantitatively. Moreover, the amount you pay for riders is small when you consider that you would otherwise have had to pay a lot more for a completely new cover for the same benefit. Most customers are usually not aware of the various types of riders available.”

Deepak Sood, chief executive officer and managing director, Future Generali India Life Insurance Company, said, “Some of the covers are generally not available on a standalone basis and, hence, availing them with a rider with some insurance policy is the only way.”

You can tailor-make your insurance policy based on your needs by selecting the right riders. Insurance companies offer a bouquet of riders. Here are the popular riders available on the shelf.

Accidental death or double accident benefit rider: In the event of death of the insured due to some accident, the insurer pays the sum insured, which is generally equal to the original base policy sum insured.

Term assurance rider /additional term benefit rider: It allows the policyholder to increase the life coverage component of the base policy so that in case of any unfortunate event, like death, his family gets a higher sum insured.

Family income benefit rider: On the death of policyholder, this rider ensures a steady flow of monthly income to the heirs of the policyholder.

Waiver of premium rider: In the unfortunate event of death or total disability of the insured, family members of the insured find it difficult to continue the insurance policies taken by the insured. This rider basically waives of the future premiums that are to be paid by the insured in case of such events.

Accident and disability benefit rider: The policyholder is provided with a lumpsum or annual payment in case he meets with an accident that causes permanent, temporary, partial or total disability. In this case, the life insurance continues for the rest of the tenure.

Major surgical/surgical care rider: This rider is helpful in cases where the insured needs to undergo a life-saving surgery. However, the rider will not provide coverage for any treatment that does not require surgery. Also, the insured should go through the list of surgeries that would be covered before opting for this rider.

Critical illness rider: The insured may opt for this rider in case he wants extra coverage for any critical illness. Sum insured is provided to the insured on first diagnosis of the critical illness. The policyholder should go through the list of critical illnesses, which will be covered in the policy. It varies from insurer to insurer.

Insurance companies are innovating and coming out with new riders for their customers. Bajaj Allianz offers unique riders exclusively for women. Under this rider, the policyholder is provided certain sum insured in case she is diagnosed with any critical illness, undergoes any reconstructive breast surgery, complications while she is pregnant or for any congenital disability of the new born. Yateesh Srivastava, chief marketing Officer, Aegon Religare Life Insurance, said, “There are a number of innovative riders that we are considering. These are in the areas of gender specificity, health and income protection. At this point of time, it would be premature to share specific details.”

Most insurance companies are offering riders to their customers to enhance protection. “Offering riders is one of the additional features we give to our customers. Over time, we have seen that persistency ratio (ratio of customers renewing their policy) is better in case of policy with a rider,” said Rajeev Kumar, vice-president, product and pricing, Bharti Axa Life Insurance.

Most companies allow you to buy a rider during the policy tenure, mainly at the start of a policy or on renewal. But some companies do have restrictions so get in touch with your company to know more. In case you have bought a rider and do not need the benefits prescribed in the policy and it does not fit your bill, you also have an option to discontinue the rider on renewal of your policy. But do think through before discontinuing with a rider from your policy, because once you opt out, opting in again is generally not allowed.

However, riders do not have any surrender benefits, as they are risk-based riders. Surrender benefit is payable only when there is a saving component in an insurance policy.

Post payment of the claim amount, the rider may continue or cease depending on the terms and conditions of this rider policy. However, the base policy continues to be in effect.

There is no limitation on the number of riders one can buy. But as per provisions of the insurance regulator, Insurance Regulatory and Development Authority (Irda), the premium in respect of all the riders put together in any policy should not be more than 30 per cent of the base premium.

If the base policy lapses, the rider cover will also lapse and both may be revived based on the policy terms and conditions. The insurer may also allow revival of base policy without riders, but riders alone cannot be revived in isolation. In other words, while the base policy is in a lapsed condition, the riders cannot be revived.

The premium rates of riders vary from insurer to insurer, depending on the definitions of the cover offered under them, the exclusions, target population, selection procedure adopted by the company and the past experience it has in respect of such or similar covers.

Suresh Agarwal, executive vice-president, Kotak Life Insurance, said, “Documents that prove occurrence of the event covered by the rider is necessary to claim rider benefit.” While making a claim, in case of term riders (which enhances life coverage), no other documentation is required, but for other riders, extra documents are needed to prove the occurrence of event. For example, in case of critical illness, documents such as hospital papers and certificate of diagnosis, among others are needed.

Riders also have a separate set of exclusions. For example, in case of an accident death benefit rider, if you are involved in frivolous life threatening activities, such as parachuting and skydiving, or death while under the influence of alcohol or narcotic substances, or you have committed any breach of law, claims won’t be paid. One must carefully go through these exclusions before opting for a rider.