RIDER is a provision or modification to the basic life insurance policy that provides some additional benefit to the policyholder. By providing an additional benefit, riders enhance the insurance cover. Accidental death and disability benefit sold along with the life insurance policy is a classic example of a rider. Other such riders include waiver of premium rider, critical illness cover rider and major surgical benefit rider.
Riders are sold separately along with the basic life insurance policy. One can buy a life insurance policy offering death benefit, if the policyholder dies during the term of the policy and buy additional benefits in the form of riders to add on to protection available. Riders are good protection enhancers at a marginal cost. For example, a young man with limited earnings, may not be able to afford a 30-lakh death benefit policy. In such a case, he may opt to buy a term insurance policy of 20 lakh and buy an accidental death and disability rider of 10 lakh. A young man, in the early years of life, is exposed to the risk of death arising out of an accident than to risk of natural death.
Riders do attract some incremental premium depending on the tenure of the rider, sum assured and the benefits offered. The sum assured payable on the rider cannot exceed the sum assured payable on the basic life cover. The premium payable for health riders cannot exceed the premium payable for basic life cover for term life policies. The premium payable for all riders other than health riders — such as waiver of premium — should not exceed 30% of the premium payable for basic life insurance. Generally, the premium payable on the riders is lower than the premium payable on a separate policy offering the same benefit, as the administration and sales costs of the insurer, attributable to such benefit, are lower when the benefit is sold as an additional benefit with basic life cover.
