Should you buy Riders sold with Term Insurance? Which ones?

Are riders really as important as they’re marketed to be? How do you weigh in pros and cons? Which riders to pick, and which to pass?

You’ll often hear about riders, as you get close to finishing your term insurance customizations. Riders are easy-to-buy, add-ons on your term insurance policy through which you can access additional benefits under special circumstances. For an extra cost, you can enjoy ready-made extensions on your base term insurance plan.  

What makes Riders attractive? 

• Convenience: To get a rider you don’t have to go through any extra documentation or medical tests, in addition to the ones you already do for your base term insurance policy. So, without additional effort you’ll be able to pick an extra cover.
• Saves time: Save time by not having to manage another insurance policy. Having said that - if you’re looking to provide a comprehensive cover to your family for every possible circumstance, then, riders might be very inadequate for you.

What are the disadvantages of Riders? 

Riders are short-cuts or hacks for busy people. And like any short-cuts, they too come with a range of disadvantages too.

• Insufficient cover: Based on the term insurance plan you pick, there is often a cap on the amount of rider cover you can choose. This will limit you from choosing an adequate cover for your family.
• Inadequate customisation: Similar to buying ready-made clothes, riders might look attractive on first sight - but you will realise that there’s not much opportunity to customise them to fit your needs.
• No significant cost difference: Contrary to popular belief, the cost of riders isn’t very ‘less’, compared to comprehensive covers for the same situation. For example, our research has found that a critical illness rider and a comprehensive critical illness cover might cost you almost the same amount.

What types of riders are available? 

Based on the insurance company, several types of riders you can buy with term insurance plan. Here are some of the most popular ones and our thoughts on whether you should invest in them. 

Critical Illness Rider

The ‘Rider’ variety of a Critical illness Insurance Plan - this rider provides your family with a lump-sum amount of money - should you get a serious disease. One important thing you should note about critical illness rider is that - this amount may be paid out of your term insurance base cover (also called an accelerated rider) or may be paid as an additional sum (comprehensive rider). 

This amount can be used by your family for all the additional expenses you’ll have to bear as a result of the disease/ condition - as well as support your family’s lifestyle. 

Alternatives: A specialised critical illness policy is an alternative. We recently wrote a detailed article comparing critical illness riders and specialised critical illness policies.  if you're looking to compare. To sum up our learnings - you should only pick a Rider if you want to buy this policy in a hurry or have a strict budget constraint. If you'd like to get a comprehensive cover and can afford higher premiums, we recommend you take a specialised critical illness policy, and skip this Rider. 

Waiver of premium on critical illness rider

This low-cost add-on provides a feature that - should you be diagnosed of a serious disease/ medical condition sometime during the term, you’ll not need to pay any of your future premiums, but can still enjoy the term insurance cover for the rest of the term. This rider is a no brainer, and you should always pick it. 

Alternatives: There are no alternatives available here. 

Accidental death benefit rider

This rider provides an additional sum of money to your family, should your death happen due to an accident, during the term of the policy. We compared the cost of an accidental death benefit rider to an additional term insurance policy for the same cover - and found that there was no major difference in cost. 

However, this might be a good opportunity to increase your term cover amount (at least in cases of accidental death) - and can be useful for people who are unable to get their desirable term insurance cover, due to inadequate declared income. 

Better alternatives: A separate term insurance policy for this extra cover amount that will provide a payout in every type of death.

Accidental disability rider 

Accidental disability can cause more havoc to your family’s financial status than even death. Accidental disability rider will provide an additional sum of money in case you meet with an accident that leads to disability. 

You should however, that this rider might only provide cover in very limited cases - like permanent and total disability only. 

Better alternatives: You can instead choose a personal accident cover - that will provide more comprehensive cover offering payouts of partial, complete, temporary or permanent disabilities for nearly the same premium amounts. 

Beshak Take 

A cover in hand, is better than one in the remains in your "to-do" list, forever. 

If you are a procrastinator like many of us, and are buying the term insurance cover after months of delay (even years?), then the Rider option may be helpful for you. If you are the person who wants the best cover, can plan and ensure that the cover is bought, then you must explore and buy the separate critical illness insurance policy. 

It is knowledge like this, that helps you make smarter, well-informed decisions with respect to buying insurance. And at Beshak, we’ve made that our single-most priority. 

Got a question you’d like to get clarified? 

You can post it on the Beshak Insurance Forum - and get answers from vetted experts, for free!