Kumar family had a dream of making their 2 year old son Manish a pilot. This dream made a crash landing when his father (Prashant) died in a road accident. Prashant had taken a money back policy with a cover of Rs 3 Lakhs, which is only enough to take care of the family for not more than a year. The family’s survival is at stake. Manish’s education plans are in dilemma.

 Double Accident Benefit Rider …….. Waiver of Premium Rider …….. Curious to know more …….. Welcome to the world of Riders ………..Read on

Concept of Riders

A rider is an additional clause or condition added to the base policy that gives additional (add-on) benefit to the buyer. Riders can be compared to choice of different toppings in a pizza. A base policy is like a pizza base and choice of riders is like choice of different pizza toppings available to customize the pizza as per an individual’s requirement. Riders help to customize different requirements of a person in a single policy.

Features

Riders enable a person to enhance the scope of protection offered by a policy, qualitatively and quantitatively. Riders do not involve set up costs like underwriting. No bonus is paid on riders. Hence the premium payable on riders is very low.

The premium paid for riders qualifies for tax deduction under Section 80C or Section 80D (based on type of rider) of the Income Tax Act.

Amount of cover under a rider cannot be more than the base policy cover amount.

 Types of Riders

Waiver of Premium: This rider helps if the insured becomes disabled and loses his income earning capacity. Till the time the insured recovers and becomes employed once again, the insurance company gives up the right to collect premium or waives off the premium under this rider.

Accident Benefit Rider: This rider helps if the insured meets with an accident and becomes permanently disabled or dies. This rider covers the risk of disability or death due to accident. In case of death due to accident this rider provides additional benefit over and above the base policy cover amount.

Critical Illness Rider: This rider helps if the insured falls sick and requires hospitalization and undergoes a major surgery due to a critical illness. The critical illness rider provides protection against major illnesses and diseases. Insurance companies specify the list of illnesses covered and exclusions under this rider. If the insured is diagnosed with any of these illnesses the rider amount is paid.

Disability Income Benefit Rider

If the insured becomes disabled, this rider provides a monthly income benefit to him. At the time of taking this rider the insurer specifies a fixed monthly disability income benefit amount or the monthly benefit amount can be linked to the sum assured (SA).

For example Robert has taken a policy with SA INR 1,00,000 with disability income benefit rider. The policy specifies a monthly benefit of INR 20 per INR 1000 of SA during the period of disability.

Robert becomes disabled during the tenure of the policy for 5 months and dies thereafter. Following payout will be made:

For SA of INR 1,00,000 the amount paid will be 20 * 100 * 5 (months) = INR 10,000. Also on Robert’s death his nominee will get the entire SA of INR 1,00,000.

 Conclusions

To conclude riders give lot of flexibility to the insured to customize the policy as per his requirement. For little extra cost, riders help the insured to enhance the scope of insurance protection qualitatively as well as quantitatively.

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