How to choose term insurance riders

Published: June 21, 2021 at 9:56 am

Last Updated on June 21, 2021 at 9:56 am

We are living in the era of a pandemic, which has altered the way we used to look at insurance. Most Indians perceived insurance as an ‘investment’ or tax-saving instrument earlier, but the pandemic has made us realize the importance of protection.

About the author: Vivek Sulegai is a SEBI Registered Investment Adviser and member of Fee-only India. Previously, he worked for a mutual fund distribution company. A chance meeting with Avinash Luthria opened the doors of Fee-Only Financial Planning. He strongly believes that managing behaviour around money is equally important for financial success in addition to understanding the basics of investments. You can contact him through his website

So, getting started with what Insurance is… Insurance is a risk mitigation tool to provide for your loved one’s financial needs in case of eventualities like death, accident, illness etc.

You would require a term insurance if you have financial dependents. If you have enough assets that can generate the required cash flow for your financial dependents you do not require a term insurance.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

Life insurance companies have come up with various riders (add on benefits to your term insurance) which can get very confusing. While all riders help you, there are a few that can come in handy. Let us look at a few of the common riders and understand them better.

1 Accidental Death Rider

Under the accidental death rider, if the policyholder dies as a result of an accident – such as a car accident, plane crash, or industrial accident – within the policy term, the insurer will pay his or her family or dependent an additional sum insured for this rider. This amount is in addition to the sum assured for the family’s basic term life insurance policy.

For Example, X amount of term life insurance, and you have accidental death benefit coverage of Y amount. Now, if the insured dies, the family will receive X+Y amount.

Point to be noticed here, even without this rider, the basic sum assured will still be paid. The rider simply promises an additional sum over and above the basic sum, in case of death due to an accident.

People who work in dangerous conditions or travel frequently for business purposes can avail the benefit of the rider. The meagre additional benefits that come along don’t justify their additional cost. If you need additional cover, it would be better to opt for a higher cover in the first place.

2 Accidental Disability Rider

This rider assures that in case of the policyholder becomes disabled due to an accident, then he/she receives the sum assured against the rider. This can be received as a lump sum after the accident or as a monthly income for a fixed tenure. That might be for two years, five years, or 10 years, depending upon the financial need of the policyholder.

The thing to be noted here is, if the policyholder becomes total/permanently disabled, the entire sum assured is paid to him. In the case of partial disability, the insured gets only the partial sum assured. The percentage of disability depends upon the severity of damage as declared by the doctor treating him/her. This rider will provide an additional sum of money in case you meet with an accident that leads to disability, but most insurer’s usually limit it to 50% of your life insurance sum assured.

Most insurer’s also do not provide for temporary disability through this rider. It is recommended that you always opt for an independent personal accidental cover that provides adequate cover and includes temporary disability.

3 Critical Illness Rider

Under this critical illness rider, if a policyholder is diagnosed with one of the critical illnesses mentioned in the policy, the insurer will pay out a sum of money that can be used for medical treatment and other expenses. This amount can be used by your family for all the additional expense, as well as support your family’s ongoing expenses.

There are a few major limitations here. The sum assured for this rider is fixed during the entire tenure and cannot be increased (a big drawback as medical expenses will inflate over a period of time making the cover amount meaningless). Since it is linked to your term insurance, it ceases to exist with it. While you would require the term insurance until you have financial dependents (usually until you are 60 or 65 years of age, or till your children are financially independent), the need for a critical illness increases as you age. You would have no critical illness cover once your term insurance cover ceases.

This rider also has limited critical illnesses that they cover in comparison to an independent policy. It is better to opt for an independent critical illness cover that can be renewed and kept active well into your retirement years.

4 Terminal Illness Rider

In case of terminal illness with a doctor’s confirmation of the insurer’s death in near months, then the insurer pays the sum assured to the insured/nominee without waiting. However, this has to be confirmed by the registered medical practitioners of that specific field.

Instead of life insurance benefits being paid out until after your death, you and your family get access to some or all the funds right when you need them most. This rider is not usually offered if you are currently dealing with a serious medical condition and come with various conditions and limitations. Nonetheless, it could be a handy one.

5 Waiver of Premium Rider

Waiver of premium is an excellent rider for safeguarding policyholders against policy lapse in case of non-payment of insurance premiums. Most insurance policies cease to be active in case you are unable to pay premiums for a specific period of time.  There are two kinds of waiver of premium riders available-

(i) Waiver of premium on disability rider: If a policyholder buys a waiver of premium on disability rider, then in case of permanent disability, he/she would not have to pay the premium for the term plan in the future. But the policy will remain active till the end of the tenure, and the sum assured remains the same.

(ii) Waiver of premium for critical illnesses riders: Under this rider, if a policyholder is diagnosed with one of the critical illnesses mentioned in the policy, then his/her future premiums for the policy will be waived off. And like in the case of waiver of premium on disability, the policy will continue till the end of the tenure.

Meeting with an accident or developing a critical illness might not necessarily lead to death immediately, but it can certainly lead to reduced income generation capability. Most financial planners strongly recommend this rider, as it ensures that your term insurance remains active.

6 Income benefit rider

The income benefit rider ensures that if the policyholder dies during the policy tenure, his/her family will receive the sum assured as a monthly income for a fixed tenure instead of a lump sum. However, while buying the rider with the term insurance, the policyholder has to decide for how many years he/she wants their dependent to avail of this benefit. Say for example, after the death of the insured, the family can receive 10% of the sum assured for the next 10 years.

Although the returns under this option are lower, this is very helpful if you have a dependent who is not capable of managing money either due to old age or due to any other medical condition.

How to approach Insurance Riders

Some riders are just not needed and can increase your costs significantly, but riders like waiver of premium are very important. For an individual who has a dependent who is suffering from a mental condition, an income benefit rider can come in handy. In times of necessity, these riders may prove to be incredibly useful, as we cannot prevent the eventualities from happening, but can surely plan for the loved ones.

Always make sure that you evaluate your specific need for each rider and opt for only those that make sense.

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.
🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)