Term life insurance is an essential life insurance plan for working people, providing a safety net for their families in the case of a sudden passing. When acquiring a term policy, one important decision that every policyholder has to take is whether to incorporate riders or not. There are opposing viewpoints on this issue. Some claim that riders complicate term planning and may disfavour policyholders. Others argue that riders significantly broaden the scope of term insurance coverage.
In this post, we’ll look at the advantages and disadvantages of term life insurance add-ons. Understanding these criteria allows you to make an informed choice about whether riders are necessary for your term life insurance policy.
What are the pros of choosing to add riders to your existing policy?
- Exclusive Riders: Some riders are only available in conjunction with a term life insurance policy. For example, the Accidental Disability rider cannot be acquired as a separate insurance. To benefit from this coverage, you must add it to your current term policy. Similarly, the Waiver of Premium rider is only available for term policies and does not apply to other types of insurance.
- Cost-Effective Riders: Some riders provide an affordable way to improve your coverage. Accidental Death and Critical Illness insurance can be acquired as independent plans or as riders; however, riders typically have lower premiums. Consider this example: A 30-year-old individual wanting Rs 10 lakh in Critical Illness coverage would spend about Rs 16,800 per year for a solo policy. However, adding this coverage to a term policy might cut the annual premium to approximately Rs 8,400. The exact additional cost will depend on your unique requirements and can be calculated using a term insurance calculator.
- Streamlined Procedure: Adding riders to a term policy is a simple process. No extra paperwork or medical exams are usually necessary. Simply select the riders you want when purchasing your term policy, and your premium will be adjusted accordingly. You can also use a term insurance calculator to determine the additional cost. A separate medical exam is not required for riders such as Critical Illness or Premium Waiver for Critical Illness.
- Flexible Protection: While a term policy is a solid basis for financial stability, riders can give significant additional benefits. In the case of an accident or disability, riders such as Accidental Disability and Waiver of Premium for Disability can be essential. For example, if a policyholder is completely disabled as a result of an accident, the Accidental Disability rider can give a lump sum payout to help with medical bills or other necessities. The Waiver of Premium rider negates the requirement to pay future premiums while the insurance is operational until the conclusion of its term. By carefully analyzing the potential benefits of riders, you can improve the overall coverage offered by your term life insurance policy.
Cons of having add-ons to your term life insurance plan:
- Adding Riders may complicate the process: When you add riders to your term policy, it can become harder to understand the details of your coverage. This is because riders add extra features to your policy, making it more complicated. Having too many options for a term plan can confuse anybody and further exhaust the process of finding the one policy suitable for them.
- End up paying extra Premiums: One of the key advantages of term life insurance is its affordability. However, adding riders to your policy will increase the premium you pay. This additional cost can be calculated using a term insurance calculator. Suppose you’re 30 years old and want a Rs 1 crore term life insurance policy that covers you until age 70. The base premium (without riders) might be around Rs 10,200 annually. Adding riders can increase the premium. For instance, a Critical Illness rider could cost approximately Rs 4,200 per year. Accidental Death and Disability riders might add Rs 1,400 and Rs 1,600, respectively. In total, your annual premium with these riders could be around Rs 17,400.
- Limited Coverage from Term Insurance Riders: While term insurance riders can provide essential additional coverage, it is critical to recognize their limitations. Riders’ coverage amount may not be sufficient to satisfy your individual needs.
If you want additional coverage for these riders, you may need to purchase separate standalone policies. This could raise your overall insurance premiums. Furthermore, some insurers may limit the maximum amount of coverage you may obtain for riders under your term insurance. It’s important to thoroughly study the coverage limits of riders and determine whether they meet your individual insurance needs. If you want more protection, you may need to look into additional choices, such as standalone policies or other insurance products.
So, we are saying
Looking at both the benefits and limitations, it is clear that adding riders to your term life insurance can only be advantageous if the riders are carefully chosen. The premium for riders is based on the basic sum assured of your life insurance plan. Of course, some riders are inexpensive, while others are more expensive. However, while purchasing term life insurance, seek for riders that will make your coverage more comprehensive while not increasing the cost.
