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Are Term Insurance Riders worth their buck?

2 Mins read

Insurers offer a myriad of riders that guarantee low-cost, value-added coverage. For real? Well, don’t accept these proposals on the spur of the moment and maybe give this short piece a glance.

You might have seen that rather than simply selling their regular products, pizzerias sell extra toppings with their pizzas. But then, why do people purchase them when they are aware of the extra payable amount? Is it because of a desire for extra ingredients that improve the taste of the pizza, or because the perceived benefits outweigh the extra cost? Though consumers with voracious appetites would sing the praises of a buffet meal over an a-la-carte dinner, most pairings have constraints or hidden fees. This is especially true for riders supplied in tandem with life insurance policies.

Riders are typically plain and simple. They boost the cover amount and kind of coverage available to you via your regular life insurance policy. The volume of extra insurance you may receive with riders is determined by the value of the base policy. Riders do, however, have some pitfalls that you should be conscious of. For example, riders get exhausted once they are utilized or when the principal policy expires.

Increased Costs OR Increased Coverage?

Primarily, your chosen riders should be based on your insurance requirements. You should not acquire them simply because they are cheap.

Let’s consider the Critical Illness Benefit. If you with this coverage are diagnosed with one of the critical illnesses listed in the policy paperwork, you can receive a payout based on your cover amount. The expense of such a rider for a 40-year-old fit individual with a Rs 5 lakhs worth policy starts at Rs 3,000 and may go as high as Rs 9,500 depending on a plethora of factors. In contrast, an individual critical illness policy (coverage for Rs 5 lakh for a 40-year-old) starts at Rs 1,500 and may go up to Rs 7,500. 

That’s a steep difference of Rs. 2,000!

Superficially, piggybacking a rider appears to be more tempting because of its inexpensive cost. However, the individual policy covers a broader range of critical illnesses. In the event of this policy, you may also be able to avail yourself of a higher sum assured. Critical Illness Riders have a lower sum assured cap (determined by the value of the base policy). Additionally, their framework is tight, and there are restrictions on rider renewal. Hence, despite its massive additional cost, an individual plan makes fits the mold when reviewed in detail.

Many insurers also provide an Accidental Death and Disability (AD&D) Benefit. This rider covers you up to the sum assured in the event you die or get permanently disabled as an outcome of an accident. However, the rider may not cover any financial shortfall due to the disability, which is a more prevalent concern. This is a situation that, in certain cases, is more bitter than death since it robs you of the ability to earn and run the family.

A general insurer’s standalone personal accident plan can provide extensive coverage. This insurance not only covers accidental death, partial and complete impairment, but it also covers interim total disability and pays out a weekly benefit of 1% of the cover amount up to a total of 104 weeks (2 years). Further, the sum assured on the base policy has no impact on the level of the cover under this policy. If you own a standalone insurance plan, you have the option of increasing your coverage based on your earnings, occupation, and age.

The above considerations are equally true towards other common riders such as Hospital Cash Benefit and Term Rider.

Ditto Insurance offers help with a team of trusted health and life insurance advisors who can help you with all your insurance needs. We make it easy to buy, manage, and pay for all of your Health & Term Insurance plans. Ask how we can help you maximize savings on your deductible, taxes, and more!