Sanjay, a 42-year old advertising professional, was diagnosed with a malignant tumour in his body. He had a dependent family with parents, wife and two kids aged below 10 years. As the financial fulcrum of the family solely bearing its financial responsibilities, he had a better investment sense to buy a critical illness rider for his ULIP. The critical illness rider that he purchased covered the medical expenses incurred towards his surgery for removal of tumour and miscellaneous costs for medicines, and other medical tests. He didn’t have to worry about disturbing the lump sum savings meant for his kids’ education. Instead, the lumpsum amount offered by the critical illness rider eased his burden and facilitated his complete speedy recovery.
- What is a ULIP rider?
A ULIP rider is an add-on insurance cover that provides additional protection benefits to an individual’s ULIP (unit-linked insurance plan) for an extra premium amount. Choosing a rider for ULIP can help an individual to customize his primary plan to meet his current and long-term financial commitments. Here are some riders offered with ULIPs:
Accidental Death Rider: This rider provides an additional financial protection in case of death of ULIP policy holder due to an accident. In the event of death of the ULIP insured due to an accident, the nominee of the ULIP is entitled to receive a death benefit for the base ULIP along with an additional death benefit of this existing rider policy. Beneficial add-on covers allow an accident death benefit to the ULIP holder that shall not exceed the sum assured of the base ULIP subject to a maximum of Rs. 50 lakhs on a single life. So, if the insured has a base policy cover of Rs. 5 lakhs, then he can avail an accidental death rider cover of not more than Rs. 5 lakhs.
Accidental Total & Permanent Disability Rider: This add-on plan provides an extra insurance cover to the ULIP holder in case of total permanent disability resulting from an accident. If the accident leaves the insured permanently disabled to the extent that he/she may not return to his work and won’t be able to pay any premiums thereafter, a good ULIP add-on insurance offers the life insured a disability benefit that can be revived only along with the base ULIP and not in isolation. The benefit can be availed within 180 days of the occurrence of the accident during the active policy term and is subject to a maximum sum assured of upto Rs. 40 lakhs on a single life under the base ULIP.
The rider, however, excludes disability arising out of suicide, any self-inflicted injury under the influence of alcohol or narcotic substances, war, riot, civil commotion, nuclear or any chemical contaminations, indulgence in adventure sports like skydiving, mountaineering, river rafting, etc.
Critical Illness Rider: If the individual is affected by life-threatening illnesses like cardiac arrest, cancer, tumour, paralytic stroke, etc, that can totally bring down his health, then he must also be suffering a great deal of financial losses resulting in the lack of mental peace. Having a for the base ULIP can ease an individual’s financial burden by offering him a lump sum amount to meet medical costs involving any clinical tests or treatments. Upon diagnosis of one or more critical ailments listed in the policy document, the lumpsum amount can be availed at a premium that shall not exceed 100 percent of the premium under the basic ULIP and the cover under this rider shall be upto the premium paying term of the base policy or upto 65 years last birthday of life assured, if earlier.
Critical illness rider cover shall exclude any health issues resulting from a pre-existing condition, or any other critical illnesses that occur before 90 days into its coverage. Illnesses resulting out of hazardous lifestyle habits like smoking or alcohol abuse, or participation in high-risk pursuits like skydiving, hunting or martial arts, or acts of war and terrorism are also excluded from the ambit of rider’ coverage.
Premium Waiver Benefit Rider: This rider can become the savior for an individual and his family if he becomes permanently disabled due to an accident or critical illness that can hinder his daily activities, ability to work and pay the base ULIP premiums. In case of permanent disability or critical illness, a beneficial rider waives off all future premium payments of the base ULIP without affecting the individual’s investment and life cover under the ULIP. All the future premium payments would be borne by the insurance company as and when due and allocated to the unit funds in the same chosen proportion. Such a rider can help an individual fulfil his family’ life goals without burdening the family financially.
Conclusion
Riders can be an invaluable source of customization for enhancing the cover of an individual’s existing ULIP, instead of buying a new ULIP with higher costs. Just like the ULIP, the rider policies too can be exempted of tax deductions under sections 80C (for accident and disability benefit riders) and 80D (for health-related or critical illness riders) of the Income tax act, depending on the type of rider chosen. Riders also come with a certain flexibility to go along with any sort of insurance policy, including the ULIPs. Thus, it is recommended to evaluate the need for each specific rider and the benefits it shall offer, instead of merely opting it for low premiums.