An insurance plan can add significant value to your family’s finances by securing their future in the event of an eventuality. There are ways, however, to make your insurance plan even more efficient.
Enter insurance riders
Ajinkya, a software yuppie, knows enough about life insurance to appreciate the need to buy a policy at the earliest.
While buying the insurance plan, he come across riders and learnshow they can make his insurance policy even more meaningful.
This gets him thinking and he does a bit of browsing to understand exactly how insurance riders work and how he can benefit from them.
How insurance riders work…
Think of insurance riders as an add-on to the insurance plan, a supplementary cover that is triggered under certain conditions. The rider benefitis in addition to the life cover on the primary insurance policy. Riders serve to enhance the overall life cover under specific eventualities.
So this is how riders work –
Rider + insurance plan = enhanced cover
As you would have understood by now – riders are contingent in nature.They are ‘activated’ by specific events – the events they are meant to cover.If and when the event is triggered, the policyholder receives the rider benefit. Meanwhile the primary policy continues as it is.
For e.g. if the policyholder takes a disability rider, he will receive the rider benefit on the pre-specified disability. The benefit on his primary insurance policy continues as it is.
Riders for diverse needs
Ajinkya has learnt that there are riders available for a number of eventualities. Individuals can opt for riders based on their needs and specific medical conditions.
Some of these riders include:
Once you add a rider…
Once Ajinkya attaches a rider to his primary insurance policy he will pay a dual premium- on the primary policy as also onthe rider. So total premium is the sum of policy premium and rider premium.
Ajinkya can claim tax benefit under Section 80C on the total premium amount.
Riders can be very useful as we have seen. They can add considerable depth to the insurance policy. If selected carefully in line with the individual’s needs, they can boost the life cover considerably offering better financial support to the insured and his family.
The most important tool you can add to your life insurance policy, is a rider. Riders are additional provisions made to an insurance contract, to extend or reduce the benefits payable by the policy. They can also affect the overall policy quote. Knowing how riders can get you extra benefits is a great boost to your ability to customise your insurance policy.
Critical Illness Rider
This rider covers critical illnesses that may or may not be fatal. To avail this benefit, you need to survive the illness by a minimum of 30 days from the date of diagnosis. The downside is that the rider would be subsequently terminated. However, the base policy would continue uninterrupted, with regular premium payments required.
Accidental Death/Disability Rider
This is the most commonly offered rider. It ensures that in case of death by accident, the beneficiary gets twice the sum assured stated in the original policy. In addition, it also covers disability in case of an accident that does not result in death. If there is a loss of more than one limb, or sight in both eyes, or loss of one limb and sight in one eye, the beneficiary gets twice the value of the original policy. If there has been loss of one limb or sight in one eye, half that value is paid. Once the payment has been maid, this rider is terminated.
Income Benefit Rider
This rider guarantees you the benefit of income lost, along with sum assured, in the event of the insured’s demise. That is, if the person whose life is insured passes away, the family will not only be paid the policy cover, but also a monthly income to make up for the loss of income generated by the death. These income payments are made for the duration of a set number of years, which are defined within the rider.
Waiver of Premium Rider
In the event of an unforeseen circumstance that leaves you unable to pay your premium, this rider is the most useful provision to have in your insurance policy. You will be released from further premium payments, but the policy cover will not be terminated. As such, it is one of the most beneficial riders to have.
These were the most important riders currently available on life insurance policies. Most are inexpensive and provide a significant number of added benefits to your base policy. However, it is imperative that you read the fine print on each rider very carefully before committing yourself to any of them.
To know more about Unit Linked Insurance Plans, please click here.
When you buy a ULIP plan, you also select the funds that you want to invest in.
Based on your preference, you also select a percentage that you want to invest in each fund. This is called Fund Apportionment. During the policy period, you may want to change these investment amounts based on how the markets are performing. This activity is called Fund Switching.
Sure, Let’s take the example of Mr. Rajesh who has a bought a policy for Rs. 50,000.
|Watch a Demo|
|Watch a short presentation on how to login to the Customer Portal and switch your funds. Please note that you need Flash Player to view this animation.|
No! Please remember that when you make a fund switch the apportionment and the allocation applies to the current year only and does not get automatically rolled-over to the next year.
In the above example, when Mr. Rajesh pays his renewal premium next year, the fund apportionment/allocation will be the same as his original apportionment that he had requested at the time of purchase (ie. Debt Fund 20%, Equity Index Fund 50%, Equity Plus Fund 30%).
You can make the Fund Switch permanent by changing the fund apportionment to be the same as that in recent fund switch. This can be done using the Fund Apportionment option in the service menu.
See Demo : How to Change Fund Apportionment
In the example used above, Mr. Rajesh should set his new Fund Apportionment to:
|Equity Growth Fund II||Provides capital appreciation through investment in selected equity stocks that have the potential for capital appreciation.|
|Accelerator Mid-Cap Fund II||Achieves capital appreciation by investing in a diversified basket of mid cap stocks and large cap stocks. Minimum 50% of Equity Investments would be in Mid Cap stocks|
|Pure Stock Fund||Specifically excludes companies dealing in Gambling, Contests, Liquor, Entertainment (Films, TV etc.), Hotels, Banks and Financial Institutions.|
|Asset Allocation Fund||Realizes a level of total income, including current income and capital appreciation, which is consistent with a reasonable investment risk. The investment strategy involves a flexible policy for allocating assets among equities, bonds and cash. The fund strategy is to adjust the mix between these asset classes to capitalize on the changing financial markets and economic conditions. The fund adjusts its weights in equity, debt and cash depending on the relative attractiveness of each asset class.|
|Equity Index Fund II||Capital appreciation through investment in equities forming part of NSE NIFTY|
|Bond Fund||Provides accumulation of income through investment in high quality fixed income securities.|
|Liquid Fund||Protection of the invested capital through investments in liquid money market and short-term instruments.|
Hope you found the information presented in this article useful. Please leave your questions in the comments section below. Thanks!
You can also manage your life insurance policy via the Bajaj Allianz Customer Portal. To know more about how it works, click here.