Riders and their use:
They're the insurance industry's innovation for customizing the policy to the extent possible, while keeping a uniform base policy available. Riders provide additional risk protection, and thus the policyholder has got to pay a risk premium. In most cases, riders can only be bought in conjunction with the bottom policy at the time of initial purchase, and can't be added later. Riders are optional, provide pure risk, and don't have any investment or savings element to them.
Most riders are added on to life assurance policies, and have a big tilt towards health related risk. Of late, we've seen that Motor insurance policies even have begun to supply riders along side the bottom policy.
Since the riders are typically bundled in with the bottom policy, they are doing not have any additional administrative charges or customer acquisition charges, resulting in a coffee cost. IRDA has capped that the utmost premium that's purchased riders can't be quite 30% of the bottom policy cost. Any benefit arising out of a private rider cannot exceed the essential sum insured.
The issue in India is that the insurance sales agent is competing on price, and needs to convince the prospect to shop for an policy by showing him low price. When a rider is added on, the worth of the policy obviously goes up. Thus there's not much thrust on riders at the purpose of sale, resulting in a take up rate for riders which is way less than its potential.
Some of the foremost popular life assurance Riders are:
a. Double Sum Insured rider (mostly in Child Policies): within the event of a death to the parent, the sum insured is paid to the kid (or guardian) at the time of the death, and a further sum insured is paid at the maturity of the policy.
b. Critical Illness Rider (or Dread Disease rider): during this rider, the sum insured is paid to the life assurance policy holder within the unfortunate event of the policyholder contracting a critical ailment like attack , kidney failure , cancer etc. In most cases, the sum insured is paid to the policyholder and therefore the policy terminates. Critical illness riders become costlier with age, because the probability of contracting a critical disease increases. In certain cases, the insurance firm would refuse the rider coverage to the insured thanks to their health condition at the time of entry. Thus it's better to shop for the Critical Illness rider at a younger age.
c. Accidental Death and Permanent Total Disability rider Through this rider, a further sum insured is paid to the nominee (in case of death) or to the policyholder just in case of a permanent total disability.
d. Waiver of premium rider: This rider triggers in when the insured becomes completely financial unproductive (say through an accident or a disease) and is at the danger of not having the ability to earn. Under this rider, the insurance firm takes on the responsibility of paying the premiums till the policy maturity at which stage, the sum insured (or the fund value) is paid to the insured
e. Spouse Insurance rider or Joint Life Rider: Through this rider, the insured and therefore the spouse are often covered through one policy. Sum insured is paid to the surviving member just in case of death to at least one of the insured.
f. Guaranteed Insurability rider: Through this rider, you buy the choice of accelerating your life cover at any significant life stage (marriage, birth of youngsters etc ) which could increase your financial liability without having to travel through a checkup .
g. Surgical assistance benefit rider: This rider provides much needed financial assistance to the insured during the time of a procedure needing surgery for 43 surgical procedures.
h. Investment Guarantee Riders: just in case of negative market returns, this rider guarantees claim value to the extent of premiums paid.
Some of the Motor Insurance riders are:
Zero depreciation rider: Through this rider, the car owner can make sure that within the case of any claim, he's paid the complete cost of claims on parts like tyres, bumpers, windscreen etc. within the situation where the rider isn't opted for, the insurance firm would only pay the depreciated value of the parts whereas you, because the owner, would have a substitution cost which is far higher for the new parts
Return to Invoice rider: This rider ensures that just in case of an accident or theft where the car may be a total loss, the complete invoice value of the car is paid to the car owner
Payments made towards riders (except Critical Illness and Health riders ) enjoy the advantages of tax exemption under section 80C of the tax Act. Critical Illness rider enjoys tax benefits under section 80 D. Proceeds received within the case of a claim are tax exempt under section 10 (10 D )