Term Rider

A Term Rider, also known as Term Assurance Rider, is an optional coverage under life insurance. It provides a sum assured in addition to the base plan’s sum assured in case of untimely demise of the life assured to strengthen the financial standing of their loved ones in their absence. The benefit under this rider can be availed by the nominee as a lump sum or by way of regular instalments. However, no maturity benefit is payable to the life assured under this rider. This is different from a term life insurance plan.

Features of Term Assurance Rider

Following are some of the common features of a Term Assurance Rider - 

1. Entry Age: The permitted entry age under the rider is usually 18-65 years.
2. Availability: You can choose to opt for the Term Rider at either the starting of the base plan or at any of its annual anniversary.
3. Benefit Payout: The rider benefit can be availed as either a lump sum or in monthly instalments over a period of usually 10 years is payable to the nominee as chosen by you at the time of policy inception.
4. Sum Assured: The minimum sum assured under this rider is usually INR 5 Lakh and can go up to INR 49 Lakh depending on the terms and conditions of the chosen insurance company.
5. Policy Premium Term & Mode: The rider premium paying term is usually the same as the base policy’s premium paying term, subject to a minimum of 5 years. You can choose to pay the rider premium on a monthly, quarterly, semi-annually, or annually basis.

Benefits of Term Assurance Rider

Some insurers pay the Term Assurance rider benefit as a lump sum to the nominee, while some allow the life assured to choose the benefit payout mode as either a lump sum or regular monthly instalments.

After the payment of the rider death benefit equivalent to the rider sum assured, the rider plan ceases to exist.

How Term Assurance Rider Works?

Let’s understand how the Term Assurance rider works with the help of an example - 

Depending upon the benefit payout mode chosen by Mr. Reddy, the following benefit shall be payable to his nominee in case of his death during the policy term - 

1. Lump Sum: A total death benefit of INR 90 Lakh (INR 50 Lakh + INR 40 Lakh) shall be paid to his nominee on the date of death.
2. Monthly Income - Base plan sum assured of INR 50 Lakh shall be paid immediately to the nominee. Also, a monthly benefit of INR 33,333.33 shall be paid to the nominee for the next 120 months from the date of Mr. Reddy’s death. The monthly benefit payment shall start from February 15, 2021.

Term Assurance Rider Exclusions

In case of death of the life assured due to suicide within 12 months from the date of commencement of risk, the nominee is entitle to recieve at least 80% of the total premiums paid till the date of death. Thus, in case of suicide committed by the life assured, a maximum of 20% of the premiums paid can be excluded by the insurer from the death benefit. 

Who Should Buy a Term Assurance Rider?

Term Assurance rider is a suggested rider plan for the following - 

1. Sole earning member of the family
2. Individuals with a large number of dependants
3. Individuals involved in risk-prone professions