All of us realize the importance of being covered under a life insurance policy. In the case of untimely death of the primary bread earner of the family how a death benefit under term insurance can save the dependants from a financial depression, we need not reiterate this fact.
Life insurance companies also come up with innovative Endowment, money back, and other investment and retirement plans as per the need and wants of the customers of this modern age. There are many variations and innovations employed in the contemporary life insurance products which can be aptly called as an advanced version of the traditional term and endowment plans. Some of these variations can be created by one or a combination of below:
- Repositioning the pay out under the products e.g. Income option in death plans, instalment pay outs.
- Separating the premium payment term and pay out term. Say premium is paid only for 30 years and life is covered till 80 years of age.
- For participating policies there may be guaranteed or non-guaranteed bonuses. Variations can be created in the norms of bonus payments.
- Some portion of the benefits can be unit linked or investment dependant.
- Offering riders to customize the insurance policy as per need and budget of the customer.
Riders are additional coverages or add-ons that is not included in the basic product and kept separate as everyone may not require inclusion of the same. Riders are basically for policy customization purposes. These coverages can be added to the policy as per need and budget of the customer by payment of nominal additional premium. Premium paid on the riders can also be used for tax benefits under section of IT laws. In this article and in the section below we will be discussing about the common riders that are available with the life insurance policies.
Accidental death/disability benefit rider: Death due to any reason is anyway covered in most term insurance plans but as per this rider and depending upon the product feature, there may be an option of payment of say double or 1.5 times the sum insured in case of accidental death. Apart from term plans this rider is provided with other types of life insurance policies as well. In case of permanent total disablement, the policy provides benefit pay out some products may have the option of waiver of premium also. This rider is pretty cheap and is easily available with nearly all types of life products.
Critical Illness Rider: As per this rider, on the diagnosis of one of the listed critical illnesses the policy will pay the mentioned benefit as per other terms and conditions. Again, the pay-out structure may vary i.e. the benefit may be paid as lumpsum or in stages. There may also be a on option of waiver of future premiums once a critical illness like cancer is determined. This rider is also quite a popular one and is offered with varied types of life insurance products.
Guaranteed Insurability Rider: This rider if opted, allows an increase in sum insured in future as per policy terms without any medical underwriting and enquiries to health of the policyholder at that time. In other words, your insurability is secured by paying a nominal additional premium in advance. This is helpful for people who plan to increase the amount of insurance cover in future.
Return of premium option: Rider is generally sold with term insurance plans and ensures the return of basic premium to the policyholder if he survives the policy term. In case of a pure term plan even after paying premium for years the policyholder receives nothing if he survives the policy term. If such thinking is stopping someone from purchasing a term plan this rider is suitable to opt for them.
Surgical benefit Rider: A benefit is provided for undergoing any surgical procedure as per policy terms. One should remember this is not an ordinary health insurance and should carefully read the rider exclusions. Some of which may be normal hospitalization without surgery, surgery due to pre-existing diseases etc.
Second life option: This rider covers two lives under a single policy without the need of purchasing a separate insurance. This is most appropriate and useful for married couples.
Child Term rider: If added in the policy, death benefit is provided if the child named in the policy dies before the stipulated age as per policy terms. This may have a convertible option on attaining maturity of the child.
Accelerated death benefit rider: As per this rider, policyholder may use a part of the death benefit on occurring of a terminal serious illness which may shorten the life. This can be like, 25% to 30% of the death benefit and can be used for proper treatment. This part is subtracted from the death benefit and the rest amount is paid to the nominees on death.
Long Term care rider: If opted, in case of long-term care requirement in nursing home or home this rider provides monthly income to the policyholder.
Life insurers as a part of product innovation continually keeps on introducing various modifications and additional covers to suit the emerging need and demand of its customers. It is always advisable to do self-research and engage to a discussion with the insurer representatives about the various options and coverage available to get help to zero-in on an affordable product of choice.