How well you know your insurance policy?

Ask most individuals who own an insurance policy about the details pertaining to the same and the most likely answer would be ‘I will have to ask my insurance agent about it.’ Ask these same individuals about which riders have they evaluated while buying their policy and the answer would be even more blurred.

While it is important for any individual to have an insurance policy to cover his life, it is equally important to evaluate the rider options available to him while buying the policy.

What are riders?
Riders, in layman parlance, are additional benefits available to an individual to compensate him for losses. These are in addition to the life insurance cover taken by him. There are various riders available to an individual like Accidental Death Benefit rider, Critical Illness Benefit rider, Waiver of Premium rider, Permanent Disability Benefit rider, etc. It is important that individuals evaluate each option carefully before deciding which one to opt for.

For example, in the case of say, a CIB rider, insurance companies have a list of illnesses that are covered by the rider. An individual must enquire about the list of illnesses covered by the rider so as to make an informed decision.

To extend the example, another point worth considering about the CIB rider is in the way CIB proceeds are disbursed. Some insurance companies take the rider premium to create a separate account for an individual for the same. Which means that if the individual was to fall ill and the illness was classified as a critical illness, he would stand to get an amount equivalent to that for which he has been covered by the CIB rider.

In case of some insurance companies, this amount would be over and above the sum assured. While with other companies this amount would be deducted from the sum assured and the life cover available to the individual would stand revised downwards to the extent of the CIB amount disbursed.

The point of disbursement also becomes important while opting for a CIB rider. While some companies make the CIB payment on the first occurrence of critical illness during the term of the policy, other companies make the payment only after an individual has managed to survive for a specified number of days (say 30 days) after the date of the claim.

In view of this, it is important that an individual knows his needs and opts for a rider accordingly. For example, if he already has a mediclaim worth, say Rs 500,000 and he’s not married, then opting for a CIB rider wouldn’t make prudent sense. Also, another positive in favour of riders vis-à-vis medical insurance is that the entire rider money is given in the hands of the insured irrespective of the expenses incurred as opposed to medical policies wherein only the actual expenses are reimbursed.

Another noteworthy point in case of PDB riders: please check how the respective companies define permanent disability before adding it to your life insurance premium. Some companies give the benefit amount of PDB only if, say, there’s permanent loss of use of 2 limbs and a permanent and immediate inability to work. In layman parlance, it means an individual will not benefit from the PDB rider if he loses only 1 limb (i.e. 1 leg or 1 hand).

In case of child plans, single parents or families with a single earner could especially benefit by opting for the WOP rider. This rider waives all the future premiums if the premium payer (i.e. the parent in this case) expires before the completion of the policy term. The policy remains in force and the child is entitled to the benefits on maturity.

So does all this talk on riders being beneficial mean that medical insurance is not necessary? Not at all. All we are trying to say is that individuals should evaluate their medical insurance options vis-à-vis riders and opt for those which make practical financial sense. Careful planning on this front might even lead individuals to alter their course of action and thereby secure their financial future.


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