The advent of internet has made the purchase of a life insurance a highly convenient task. It has removed the dependency on agents as one can compare different plans at different websites to opt for the best suited plan.
However, there are other factors that one needs to keep in mind while purchasing an insurance. Most importantly, one must opt for the best riders in order to enhance the benefits of the plan as well as to provide more financial security.
A rider is an add-on cover to the primary policy, which offers benefits over and above the policy subject to certain condition by paying additional premium to suit your needs. Cost of the riders varies from insurers to insurers. Few life insurers offer in-built riders with the primary policy without any additional cost and premium. Pointing out the importance of riders Rishi Mathur, Head-Products and Strategy, Canara HSBC Oriental Bank of Commerce Life Insurance Company, said, “The benefits of selecting riders is that you go through the process just once and get multiple coverage. In general, the cost of riders is relatively lower and hence by paying a bit extra, you are covered for multiple risks.”
There are multiple riders offered by life insurers to meet the need of the policyholders. They include critical illness, waiver of premium, waiver of premium on critical illness, extra payout on accidental death, cover against accidental disability and heart and cancer cover.
The benefits depend on the types of riders. A policyholder can buy a term insurance plan for Rs1 crore and opt for an extra payout on accidental death benefit of Rs25 lakh. In this case, the nominee will be paid Rs1.25 crore (1 crore + 25 lakh) as accidental death and one crore for normal death. In certain plans, the policyholder can even choose buy an accidental death rider for just Rs25 for a 30-year term insurance. That means, he or she needs to pay only Rs750 for the entire plan. This clearly highlights the benefits of a rider.
Since the plans differ from insurer to insurer, policyholders should not ignore to check the in-built feature while comparing life insurance plans. Most plans offer waiver of premium, early claim on terminal illness and cover against critical illnesses as in-built riders. It is always advisable to opt for riders before buying a term plan else as you may not be allowed to opt for it later. During the policy tenure, however, policyholder can cancel the riders if they do not wish to continue.
Similarly, waiver of premium for disability rider is a provision where all future premiums are waived off if the policyholder is unable to pay the future premium in case of permanent disability. In case of critical illness rider all future premium are waived off or certain percentage of the sum assured or the actual sum assured will be paid out, if the policyholder is diagnosed with a specific critical illness. This payout can help the family to take care of the medical bills and cost of treatment. “Selecting the right riders is important as you would like to protect yourself against events which could impact your family’s finances. You should ensure that you have considered such factors carefully and not just added all riders, some of which may not be relevant or could be expensive as compared to the value of the benefit.”
According to insurance broking firm Coverfox, 70 per cent of the policyholders opt for atleast one rider while buying the policy from their website. However, Dr. S. Prakash, Chief Operations Officer, Star Health Insurance, warned from blindly following the online path. He said, “One can always buy insurance online however, most people are not able to choose and identify the right insurance plan for themselves. With hundreds of plans coming up every day, choosing the right plan online in India is becoming complex.” There is a big gap between the insurers and the policyholders. Using simple terms in policy wording will help to avoid this gap, he concluded.
Riders works as an umbrella against the uncertainties in life. Paying few extra bucks while buying life insurance plans will only help us to be ready for the unforeseen eventualities.
Choosing the right riders could help one secure financial freedom in future and also provide with a peace of mind.
nirmala@outlookindia.com