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Understanding Term Insurance Rider With The Help Of An Example

Updated On Dec 07, 2021

Riders are extra, supplementary conditions that are billed separately and apply to an individual's primary insurance. A rider, in simple words, is an addition to an existing insurance policy that adds additional coverage and risk protection. Insurance riders are low priced add-ons that can be added to an individual’s current life insurance policy. They supplement and broaden an individual's insurance coverage to cover more than simply the expense of death.

On the other hand, a simple insurance policy is insufficient. Benefits that add value to the chosen insurance plan are required to assure comprehensive coverage. Riders are a type of benefit that is chosen depending on the size of a person's family, future demands, living expenditures, and other factors. To understand more on term insurance riders, read on.

Understanding Term Insurance Riders

Following are some listed riders that can be understood with support of their respective examples -

  • Waiver of Premium Cover

In the event of dismemberment, disability, or medical issue as a consequence of an accident, illness, or other cause, this rider gives a waiver on all future insurance premiums on a relative of an individual. Aside from that, the insured person's family continues to benefit from the policy's basic benefits, which may include bonuses, guaranteed income streams, or fund value growth, depending on the policy's kind.

For example, a 32-year-old woman gets a life insurance savings plan to secure her the financial future of her family and build a fund for her child's higher education. She decides to opt for a term plan with a policy term of 25 years and a premium payment period of 12 years, costing INR 60,000 per year.

However, the woman picks a waiver of premium rider because she is concerned about the child's future in the event of an unexpected incident, which ensures that if she is diagnosed with a serious disease or becomes handicapped for any reason, the insurance will continue to cover her without the need to pay any more premiums and that all future benefits will remain preserved.

All future premiums will be waived until the base plan's monthly payment term expires if the insured is involved in an accident and loses both arms after paying six payments.

  • Accidental Death And Dismemberment Cover

Unpredicted events or accidents can ruin anyone's future ambitions while simultaneously draining the family's money account. In the case of an unintended death or dismemberment, this rider guarantees that the family's financial future is protected. If the life insured is engaged in an accident that leads in death or dismemberment, the additional protection benefits kick in.

For example, a 29-year-old woman gets a life insurance policy to protect her financial future. She decides to opt for insurance with a 17-year policy term and a 12-year premium payment period, with an annual premium of INR 60,000. She also goes on to get an accidental death and dismemberment rider with a sum assured of INR 5,00,000, a policy term of 17 years, and a premium payment period of 12 years to ensure complete coverage.

In this case, if the insured individual dies in a car accident after paying six premiums, her family is entitled to the guaranteed death benefit of the term plan, as well as any incentives. The family is also entitled to a rider sum of INR 5,00,000.

  • Critical illness And Disability Cover

After a 'waiting time,' an insured individual obtains total financial protection against a number of dangerous diseases under this rider. In the case of a diagnosis of one of the covered critical diseases, the insurance company will provide a predetermined payout to the life insured and their family. In the rider's terms and conditions, the list of main illnesses included and the required surviving duration are listed. Purchasing this rider is always a good financial option because it lowers the cost of combating a variety of dangerous diseases.

For example, an individual decides to buy a life insurance policy with a 5 year premium payment term and a 10 year policy term. They also purchase a critical illness and disability rider (a INR 10 lakh rider amount insured with a five-year rider premium payment period) at a modest additional cost to ensure further protection.

In the third year of the coverage, if an insured individual is diagnosed with one of the major illnesses listed, the ensured rider sum of INR 10 lakh is paid to them on proven diagnosis of disease and the rider is terminated. The normal benefit of the insurance is likewise unaffected by the rider payout.

Endnotes

Individuals should always read the terms and conditions carefully in order to grasp the benefits, exclusions, and qualifying criteria of the riders being evaluated. Speaking with a knowledgeable insurance agent advisor before making a final decision will help clear up any misunderstandings about the rider's benefits.

Also read: How Can Term Rider Be Beneficial?

How Riders Help You Support Your Life Insurance Policy?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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