As an insurance-seeker, insurance agents or financial advisors may have often advised you to enhance your basic cover with rider benefits. It may not be wise to blindly follow their recommendations to buy a policy merely, but you can do your own research and identify riders that can add real value to your basic protection plan.
Essentially, riders are add on covers insurers provide to enhance the scope of a life policy. Riders cover risks that are beyond the scope of the main life policy, resulting in a more comprehensive protection. The riders may cover critical illness (or dreaded diseases), personal accident (or accidental death and dismemberment), and waiver of premium benefit (applicable to child Ulips). These add-ons step in during situations where the main life insurance policy may not come into play.
For example, if the insured meets with an accident resulting in absence from work, he/she could be faced with the prospect of loss of income during the period of recovery. The life cover will not be able to offer any succour in this situation. This is where a personal accident rider, covering temporary disability, would come into play. The insurance company will compensate the insured monetarily during the period, depending on the policy terms and conditions. Likewise, if the policyholder is diagnosed with a critical illness, the life cover will be of no help as it does not cover funding of the treatment cost.
On the other hand, if it is topped up with a critical illness benefit rider, the insurer will hand out a lump sum upon diagnosis of such an illness, unlike a health insurance policy. Thus, it can take care of the post-recovery costs as well. Cancer, kidney failure, and bypass surgery are some of critical illnesses covered under the rider.
To identify the rider best suited for you, take into account factors such as age, regular mode of commuting to work and history of illnesses in your family. Also, consider the costs involved. Insurers levy an additional premium as per their underwriting norms when you decide to add such rider benefits to your basic policy.
In terms of tax breaks, rider add-ons make you eligible for deductions in line with life and health covers. For instance, if you opt for an accidental death rider, you can claim deductions under section 80 C on premiums paid; for critical illness, the relevant section will be 80 D.
