Make sure the rider adds value rather than just adding to cost.
More Indian families are opting for insurance riders that offer protection against disability, critical illness (CI), and income loss, according to Policybazaar.
South India leads this shift, with 45 to 47 per cent of customers purchasing at least one rider -- twice the adoption seen in the northern markets.
Riders are optional add-ons that expand the scope of a life insurance policy.
"They offer extra protection against risks such as accidents or illnesses," says Maneesh Mishra, chief product and marketing officer, Bandhan Life.
Expand coverage at low cost
Riders are cost-effective. "Rider premiums are significantly lower than those of standalone policies for the same benefits," says Varun Agarwal, business head, term insurance, Policybazaar.com.
Riders also offer customisation and simplicity.
"A rider lets customers tailor coverage to specific risks.
"They also offer convenience by combining multiple covers -- life insurance, critical illness, and personal accident --into one policy," says Agarwal.
Mishra adds that they also offer tax benefits under the old tax regime.
Standalone policies vs riders
Standalone policies are more suitable when customers require higher or more specialised coverage than a rider can provide.
"A policy specifically designed to cover a certain critical illness, for instance, will provide more flexibility, more comprehensive coverage than a CI rider, and possibly a higher sum assured," says Mishra.
Riders have another limitation: Their premium cannot exceed the base policy premium, thus limiting the level of cover they can offer.
Sum insured, premium and renewability
The right sum insured for riders depends on a variety of factors.
"Coverage should be chosen after considering income, loans, health issues, family responsibilities, lifestyle, and future goals," says Casparus J H Kromhout, managing director and chief executive officer, Shriram Life Insurance.
"For critical illness, the benefit amount should consider treatment and recovery costs, and medical inflation," says Vikas Gupta, chief product officer, ICICI Prudential Life Insurance Company.
Aditya Mall, appointed actuary, Generali Central Life Insurance adds that people who travel frequently or have high-mobility roles may need higher accidental cover.
Rider premiums are usually fixed for the entire term, except for the CI rider.
"The premium for the CI rider is subject to revision by the insurer every five years from the policy inception date," says Agarwal.
Riders can have different terms.
"Most riders are renewable only up to a certain age, or for a limited period, and do not necessarily extend up to the end of the base policy term.
"A waiver of premium rider, for instance, generally ends when the premium paying term is attained," says Mishra.
Factors to consider during purchase
Make sure the rider adds value rather than just adding to cost. Check what is covered and what is excluded.
"Customers need to examine waiting periods, and survival period clauses, especially for CI riders," says Mall.
He adds that customers must understand whether premiums are constant or may increase over time, and whether the payout will be in lump sum or instalments.
Gupta adds that customers must check whether the payout is linked to diagnosis, disability, or a specific event.
Dos and don'ts
Riders must align with financial goals and personal risks.
"Do not over-insure by selecting riders without assessing real needs," says Kromhout.
Mall adds that customers must ensure premiums fit into their long-term budget. They should avoid delaying the purchase of relevant riders.
Finally, do not hide or falsify details in the proposal form.
Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.
Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.
Feature Presentation: Ashish Narsale/Rediff
