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Not all Life Insurance Riders give you a perfect ride

Practically everyone in India buys a life insurance policy (and, as often discussed, usually the wrong ones). 

Therefore, practically all are aware of the 'riders'

These are nothing but "additional covers" that the policy offers, apart from the basic life cover. They help you to customize the basic policy to suit your specific requirements.

These, naturally, come at an additional cost, over and above the premium for the basic insurance cover

Therefore, it is important that you must evaluate whether these "extra" covers are worth spending this "extra" money.

Let us look at the typical riders that can be added-on to the basic life insurance cover and assess their usefulness. If not, you would do a smart thing by simply ignoring them.

1. Waiver of premium

This rider ensures that the policy completes its intended tenure and all the benefits remain intact, even if you are unable to continue with your premium payments due to death, disability or any critical illness. These catastrophic events, during the term of the policy, could affect your ability to pay further premiums. With this rider, future premiums are waived off and the policy terms are not affected in any manner whatsoever. A useful add-on feature indeed, especially where critical long-term goals are involved.

2. Accelerated death benefit

If a person suffers a critical illness that proves to be life threatening, he may require some financial assistance even before he actually dies. This is where this rider proves its worth. It pays out a specified percentage of the Sum Assured in advance, while the insured is still alive; with the balance amount being payable after death.

Buy riders with life insurance policies only if they add value.

3. Critical Illness 

This cover pays out the entire Sum Assured upon diagnosis of any of the critical illnesses as specified in the policy. Claim is not linked to the expenses actually incurred, nor do you need to submit any bills. All that is required is that the insured should live for at least 30 days after the diagnosis. 

You can buy such a cover either through a separate dedicated critical illness policy or as a rider with a life insurance policy. Normally, a separate policy would provide a more comprehensive coverage. Also, the basic life policy may be terminated on payment of a critical illness claim. So it may be a better idea to skip this rider and instead buy a pure critical illness policy.

4. Accidental death

In any insurance policy, upon death of the insured, the Sum Assured is paid out. However, with this rider, an additional sum (usually equal to the the sum assured) is paid in case the death happens due to an accident. Ideally, we should buy a policy where the basic sum assured by itself is adequate enough for the family. Therefore, additional amount... just because the death has happened due to an accident... could be redundant and hence not worth spending the extra money.

5. Accidental disability

Given the advanced medical facilities, it is nowadays possible to save many lives. As such, in an accident, disability has become more common than death. Since disabilities can affect one's earning potential, covering for them is crucial. Herein, a certain percentage of the Sum Assured is paid out, at regular intervals, if a person suffers partial or permanent disability due to an accident. Herein too, a separate accident policy is likely to provide a better coverage than a rider.

These are the more popular riders, among many others that the insurance companies normally provide. In fact, depending on the insurer, even the above riders come with many variations.     

You may also like to note that
- Riders have to be bought along with the new policy (some companies, however, do allow adding them later)
- Tenure of the rider has to be same as the basic life cover
- Maximum critical illness cover cannot be higher than the basic Sum Assured
- Total premium for critical illness rider should not exceed the premium for the basic life cover
- Total premium for all other riders should not be more than 30% of the basic premium
- Premium paid for health-related riders get tax benefit u/s 80D
- Other riders get tax benefit u/s 80C
- Claims paid under all riders are tax-free u/s 10(10D)

Do you homework thoroughly before you opt for any riders.

Any laziness or laxity now could prove costly as this extra premium would be a burden for many years to come.

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