What are riders?
Riders refer to covers that are offered by insurance companies in addition to the basic life cover. In other words, they cover risks that are beyond the scope of the main life policy, resulting in more comprehensive protection.
What are the types of riders offered by insurers?
Rider benefits offered could vary as per the insurance company and the policy purchased by the insured. Typically, riders extended include critical illness (or dreaded diseases) cover, personal accident (or accidental death and dismemberment) and waiver of premium benefit.
How do riders help the insured?
They help customise the life cover as per the policyholder's needs. Let's say a policyholder, the sole breadwinner in the family, meets with an accident resulting in temporary disability. If it forces her to stay away from work during the period of recovery, the life cover will not make good the loss of income. This is where a personal accident rider covering temporary disability could come to the family's rescue. In such cases, the insurance company undertakes to provide monetary compensation to the insured, subject to the terms and conditions mentioned in the insurance contract. Similarly, for a policyholder diagnosed with a critical or terminal illness, the life insurance cover can provide little relief as it is not capable of preventing the drain on finances during the treatment. A critical illness rider could come in handy in such times. The illnesses generally covered under the include cancer, kidney failure, paralysis, bypass surgery, major organ transplant and so on. The sum assured under the rider is paid upfront as a lump-sum to the policyholder. Therefore, even if you have a health insurance policy in place, this amount can help meet other expenses or act as succour if the insured is unable to resume work during the period.
How does one choose the rider best suited for her?
The decision could depend on a variety of factors like your age, regular mode of commuting and history of illnesses in your family, if any. For someone who has just started her career and relies on public transport or two-wheeler for daily commuting, a personal accident policy is a must. Critical illness cover, on the other hand, would be of use to policyholders across age-groups.
Does one have to incur an extra cost for availing these covers?
Yes. The insurer arrives at the additional premium chargeable to the policyholders based on factors like their age, sum assured, premium paying term and the company's underwriting norms.
What are the tax benefits available to those who opt for these riders?
The tax breaks depend on the rider chosen. For instance, while tax benefits pertaining to premium paid towards the accidental death rider can be claimed under section 80C, critical illness premium falls under section 80D.
