Life Insurance Policy Riders: Types & Advantages

Life insurance riders provide extra financial security in the event of unforeseen circumstances, such as a terminal disease, etc. Some common types of riders, like the term "conversion rider," are included for free. Most others, though, cost more.

A stand-alone insurance policy will give you more protection than a rider. But depending on your needs, some add-ons might be worth the extra cost. Your insurance agent or broker can help you figure out what life insurance riders you need when you buy a policy.

Why are Life Insurance Riders So Important?

It's something that changes depending on what each person wants. The amount of life insurance a person needs depends on their individual financial situation and their needs. The add-on rider is one of the most important features that can help a policyholder get more value out of their life insurance.

Riders are simple policy additions that can be added to a basic life insurance plan to make it cover more things. You can choose add-on riders when you buy a policy or when you renew one you already have. The premiums for these riders are paid on top of the plan payment.

Types of Life Insurance Policy Riders

There are different types of insurance policy riders in India, each of which is explained below:

• Accelerated Death Benefit Insurance Rider

1. Suppose that you are diagnosed with a terminal disease. Insurance riders called accelerated death benefits (ADB) can use a portion of Your death benefit to cover your ongoing medical costs. To be qualified for a payout, a doctor will need to say that you have a terminal illness and only 6 to 12 months to live.
2. ADB riders cover end-of-life care, such as hospital care, nursing facility stays, and private caregivers. The money doesn't have to be spent on care, though. Some insurance companies will even recommend that you utilize the life benefit to finance a trip or other activity designed to improve the quality of your remaining time on earth. Instead of being given all at once, these benefits are given out as needed. 

• Critical Illness Insurance Riders 

Critical illness insurance riders offer expedited benefits while you're alive to cover treatment for specific illnesses, such as a heart attack, cancer, stroke, kidney failure, ALS, and other ailments that could decrease your life expectancy and leave you with exorbitant medical expenditures. The lump-sum compensation comes from the death benefit. Your beneficiaries will get the remainder of the death benefit if they file a claim on your policy within 60 days of your passing. Critical illness riders include:

1. Chronic Illness Rider: Chronic illness riders provide expedited benefits while you're still alive if you can't execute at least two ADLs: eating, bathing, dressing, toileting, transferring, and continence.
2. Long-Term Care Rider (LTC) Rider: Hybrid long-term care policies pay for care if you can't do two of six daily activities, such as showering, dressing, or eating. Adding LTC coverage is expensive, but the insurance will pay for your care even if it exceeds your death benefit.
3. Waiver of Premium for a Disability Insurance Rider: If you become disabled and can't work, a waiver of premium insurance rider pays your life insurance premiums. Each life insurance company defines a handicap differently, making qualification difficult.

• Family Insurance Riders

Adding a "family rider" to your policy means that your spouse and/or children will receive the same level of protection as you. You pay more for the rider to give you the death benefit if the person named in it dies.The following are the types of family insurance riders:

• Spousal Insurance Rider 

 Even if your spouse doesn't work or isn't the main source of income, you should still get it because you'll continue to pay for the things they do around the house, like taking care of the kids.

• Child Insurance Rider

Even though it's hard for parents to think about the death of a child, it's important to know that if one of your children dies, it can be very expensive to cover costs like their funeral or paying off their student loans.

• Insurance Riders For Accidental Death And Dismemberment

People with higher-risk activities, such as a hazardous occupation or hobby, may consider purchasing accidental death and dismemberment insurance riders. If you lose a limb or a finger in an accident, the accidental death & dismemberment rider gives you money from the death benefit. In the event that you pass away, your beneficiaries will get the payout. An accidental death and dismemberment insurance rider is usually not worth the cost because there are strict rules about how the death or injury must happen in order to get paid.

• Benefit Structure Insurance Riders

Long-term care insurance helps you deal with an illness or disability that you didn't expect. Benefit structure riders change the policy itself. The following are the types of benefit structure riders.

1. Return-Of-Premium Insurance Rider: If you outlive the term of your policy, the return-of-premium insurance rider gives you back the premiums you paid. Adding these costs a lot of money.
2. Term Conversion Insurance Rider: If you still need coverage at the end of the term of your term life insurance policy, you can turn it into permanent or whole life insurance with a term conversion rider.
3. Guaranteed Insurability Rider:To acquire greater coverage, you'll have to pay more, but you won't have to get re-examined or have your current health status considered in any way, so you won't see your premiums drop if your health does.

Advantages of Life Insurance Policy Riders

The benefits of having a life insurance policy rider are stated below:

• Different Policies Based on Your Needs

Adding a rider to your term life insurance coverage, which covers basic protection against death, lets you adjust it. Adding a rider can improve your insurance's protection against a potential risk.

• Affordable Protection Against Risks

Having an add-on rider eliminates the need for a second life insurance policy. Not paying several life insurance premiums is beneficial. Add-on riders have cheaper premiums than a fully functioning life insurance plan. Having an add-on also saves you money, which is a plus.

• There is No Requirement for Any Further Insurance Coverage.

Life insurance plans cover critical illness, accidental death, disability, loss of earnings, and more. A single insurance policy rarely covers many risks. Add-ons are important. Add riders to your base plan to acquire the same coverage as a different insurance policy.

• Additional Benefits

Families' needs are often met by specific benefits. A family with a child support rider and an additional benefit sum may benefit by having their child's schooling paid separately while providing their loved ones with the basic payment provided.

Conclusion

Life insurance riders can be added based on needs. Riders can improve your policy and save you money. Thus, a rider must meet their needs. Life insurance can help a person's financial security. A life insurance policy's principal purpose is to protect a person's loved ones financially in the case of their untimely death, thus anyone who supports a family member (also known as a dependant) should obtain one.

Also Read: 

Why Should You Buy Term Insurance Plan Online?

Top Term Insurance Riders, Definition, Benefits