Use riders with term life plan to enhance protection

Term life insurance plans are the most cost-effective risk cover available for an individual. Today, there is a wide range of riders available that one can purchase along with a term plan and thereby, enhance one’s protection. Let us look at some of them and which is the most suitable one for you.

“One can supplement or enhance their life insurance cover with a rider. Some riders are inbuilt in the term plan and hence the total premium charged is inclusive of the base and rider premium. Some riders have to be purchased separately by paying an extra premium. These riders differ in benefit and prices,’’ said Rakesh Wadhwa, chief marketing officer and executive vice-president, strategy and retail assurance, Future Generali India Life Insurance.

According to Subhrajit Mukhopadhyay, chief and appointed actuary, Edelweiss Tokio Life Insurance, riders give an umbrella of protection, which are usually very affordable. “Riders provide a significant benefit once the event (accident or critical illness) occurs. These are low probability but high impactful events and therefore should be covered,’’ he said.

The different kinds of riders available with a term plan are accidental death benefit rider, accidental disability rider, terminal illness rider and critical illness rider.

Accidental death benefit (ADB) rider – Under this, an additional sum assured is paid to the nominees if the policyholder dies in an accident. Given the suddenness of death in case of an accident, an additional sum is always useful as often the family has no time to plan their finances.

Accidental disability rider - In case the policyholder meets with an accident and is rendered partial or permanently disabled because of it, either a monthly income is paid for the next 10 years or the premiums are waived throughout the policy term. The benefit varies from company to company.

Critical illness rider – This is a living benefit rider. Under this rider, in case the policyholder is diagnosed with any of the listed illnesses, a lump sum amount is paid out. This can be either accelerated or standalone

Terminal illness rider – Under this rider, in the case life assured is diagnosed with a terminal illness a lumpsum amount is paid out. This benefit is generally accelerated.

You can choose which rider to buy based on your job and age. For instance, if your job involves too much of travelling you may be more prone to accidents and hence it is advisable to opt for accidental riders.

Due to increasing stress levels and changing lifestyles, the critical illness rider is a must buy for all. Also, treatment of critical and terminal illnesses can be very expensive, Wadhwa pointed out.

It is best to buy a term plan when you are young and start earning, at it will ensure a lower premium. But at the beginning of one career affordability could be a problem for many. This is why most people don’t even buy a term plan when they are young, leave alone the riders, pointed out Santosh Agarwal-head of life insurance, at Policybazaar.com.

“When you are young and start earning then a term plan with ADB is good enough. Later on, as your income or affordability goes up, you can buy another plan, that has a CI rider. The CI rider is slightly more expensive than the ADB because the critical illness is a more likely event to happen. When you by a 40-year product there is a good chance that somebody will go through a critical illness,” she said.

The advantage of buying CI rider with a term plan rather than as a stand-alone product or with health insurance is that the premium is guaranteed. “In health insurance products are one -year contracts and premium can change every year. But if you opt for a CI rider in a life plan, then premiums are guaranteed for a long-term, usually the life of the term plan. that is 30 or 40 years. Though in some plans premiums for the CI can change after five years,’’ she said.