Your very own insurance cover

Riders allow you to add benefits on to a basic policy, so you can customise it to match your needs

DO YOU remember paying with Lego sets when you were young? Where you could take apart or put together different shapes to form objects you desire. There's a valuable lesson here for investors. Given today's competitive environment, insurance companies are also looking at offering different options to the investor. So you can build your very own insurance plan, perfect to suit your specific needs.
Insurance companies allow this degree of cust o m i s at i o n through a tool called a rider. It's basically an add-on to a plain vanilla policy. Once you buy your basic cover, you can chose to add additional benefits through the riders that will run parallel to the duration of the basic cover. Riders help you add value and enhance your cover to include risks that the basic vanilla policy will not cover.
Riders are available on both traditional as well as unit linked insurance plans. They could be added, amended or deleted from the main policy, any time, subject to risk assessment. The riders are the additional benefits that can be added to the basic old policies, by paying a marginal additional premium. However, you cannot buy riders independently and usually riders come with their own terms and conditions that will be different from the terms of the basic policy. Also, the amount of cover you can buy under the rider is generally a function of the amount of cover you have purchased for the basic cover.
Although, riders sound like the ideal solution for customization, it is important to understand clearly what the terms and conditions are. Sometimes riders are not transparent. Also, the health riders that are available on life insurance products should not be treated as substitutes to a proper health cover since the scope of coverage under the rider may be limited. However, it is important to note that the health riders do allow you the benefit of claiming a tax deduction under section 80D of the Income Tax Act. But, sometimes, riders can prove to be a bit expensive so you really need to weigh the benefits against the total costs.
The most common of riders is the accident and disability benefit. This benefit provides the rider amount to be paid to the family of the person insured in case of death and disability. In case of death after an accident, the family stands to receive the entire amount stipulated in the basic cover as well as the additional amount purchased under the rider. In case of permanent disability after an accident, mostly the premium for the basic cover is waived off to the extent of the rider purchased. In some cases, the companies also pay a percentage of the rider amount over a period of time to offset any financial losses due to the disability.
A critical illness rider covers you if you are diagnosed to have any of the specific illnesses listed. In this instance, the rider covers conditions like heart attack, stroke, cancer, major organ transplants, renal failure, paralysis, and so on. Most companies specify a list of diseases that will be covered and the number of diseases covered will vary from company to company.
In the event of a diagnosis of a critical illness, the sum under the rider is paid to the insured person as a lumpsum. Some companies segregate a surgical assistance benefit from the cover provided under the critical illness rider.
In some cases, insurers are also known to tailor make the critical illness rider for women. Under this, apart from covering the other critcal illnesses, this rider also covers pregnancy complications and a few congenital abnormalities in the infant.
Another rider that can be bought is a waiver of premium. So in case of total and permanent disability due to an accident, all further premiums are waived while the policy benefits continue. An income benefit rider a percentage—usually 10%—of the rider sum assured is paid on annual basis to the policy beneficiary on the death of the person insured.
Given this range of choices, it not only makes sense to shop around before you buy a vanilla cover but also when you consider add-ons or riders. Also, make sure you're getting adequate cover given the costs of what you are buying.