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What is the Significance of Riders in a Life Insurance Policy ?

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What is the Significance of Riders in a Life Insurance Policy?
April 04, 2023

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A life insurance policy has become one of the most preferred investment instruments. Such a policy provides life cover in case of an unfortunate event of death. This amount provides a much-needed financial security to your loved ones even in your absence. Life insurance policies also help in long-term savings, specific life-stage planning, and provide tax advantages too. Such plans, therefore, provide a host of benefits, thus making it a popular option among individuals.

Understanding riders

Riders, also known as add-ons, are additional benefits that you may avail of in order to increase the coverage of your existing insurance policy. You may opt for riders along with your current policy by paying an additional premium.

You may choose from among various rider options based on your current and future needs. There are numerous rider options available, such as critical illness rider, disability rider, accidental death benefit rider, term rider, and waiver of premium rider. For example, if you opt for an accidental death benefit rider and in case of your demise due to an accident during the term of the policy, this rider will provide death benefit to your loved ones. This will help your family meet their financial obligations even in your absence.

It is important to understand that once a claim for the rider has been made, the benefits of the rider cease to exist. However, the original insurance will continue to provide insurance coverage as per the policy terms.

Benefits of riders in life insurance policies

Riders provide financial security over and above the benefits of your regular policy. It provides peace of mind, knowing that your financial needs will be taken care of in case of an unfortunate event.

Following are four major benefits of availing of a rider along with your life insurance policy.

1.Additional coverage

By purchasing an add-on along with your existing plan, you may avail of the benefit of comprehensive coverage. For example, a critical illness rider pays a lump sum upon diagnosis of a critical illness. This amount may be used to meet the ever-increasing medical costs, household expenses, loan repayment, and any other expenses.

2.Flexibility

Another benefit of a life insurance rider is the flexibility it offers. You may choose from numerous options and customize your policy as per your needs. In order to identify the rider best-suited for you, it is important to take numerous aspects into consideration such as age, gender, and history of family illnesses, among others.

3.Affordability

You may seek comprehensive coverage without investing in a new insurance plan. This makes a rider more affordable than buying a separate insurance policy. By merely paying an additional premium, you may enjoy greater coverage at an affordable price.

4.Tax benefits

You may also avail of tax benefits on the amount paid towards your riders. For example, you may enjoy tax deductions under Section 80C of the Income Tax Act, 1961 on the amount paid towards an accidental death rider. Furthermore, Section 80D of the Income Tax Act, 1961 offers benefits on premiums paid towards critical illness rider.

Life insurance riders provide comprehensive coverage and help you customize your policy to address specific concerns. You may, therefore, compare various rider options and avail of the ones that best suit your needs.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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