Term Plan Riders

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A Term insurance policy is a basic life insurance product designed to offer coverage in the event of the unfortunate death of the policyholder. The coverage is offered for a specific time period for which a minimum premium amount is paid by the insured. In the event of the death of the insured during the policy tenure, the nominee is eligible to receive the death benefit equivalent to the sum assured availed by the insured at the time of purchasing the policy. 
A term insurance plan is a pure life cover i.e. this policy does not offer savings or profit. Therefore, the purpose of purchasing a term insurance plan is to cover the life of the insured and to plan the financial security of the family in the event of the death of the insured.  Let’s have a look at term insurance riders.

What are Term Insurance Riders?

A term insurance rider is an optional benefit that can be availed by the insured to make the base policy more robust and comprehensive. A term insurance rider is an add-on which can be attached to the base policy in order to maximise the benefits of the base plan. Once a rider is attached to base policy, it is  activated only in the event of the occurrence of a specific event. Only after activation, a rider offers a financial cover over the sum assured offered under the base plan. Availing rider facility is purely optional. With riders, insured can customise their insurance policy as per their needs and financial goals.

What are the Key Features of Term Insurance Riders?

Term insurance riders offer the following unique features to the insured:

  • Higher financial coverage at minimal cost
  • Customisation of the term insurance plan as per personal needs and financial goals
  • Provides additional financial cover in the event of the occurrence of a specific event
  • Ensures financial security of the loved ones in the event of the death of the insured
  • Helps to make the base term plan more robust

What are the Benefits of Riders with Term Insurance?

Term Insurance rider is an excellent way to increase your financial coverage without buying a new policy. Moreover, this additional financial coverage is available at a lower premium, so to sum up the benefits of riders with term insurance is as under:

  1. Attaching a rider to the base insurance plan is affordable, at very low premium
  2. An insured can buy additional insurance coverage to ensure the financial security of the loved ones in case of any eventuality or specific events
  3. The flexibility of choosing the best rider or multiple riders to base policy in order to make it robust
  4. Riders can act as a source for income replacement as well
  5. The premiums and rider premium paid towards term insurance are eligible for tax benefits

Types of Term Insurance Riders

The following is the list of 6 important term insurance riders and the benefits available under them:

  1. Accidental Death Rider: 
    The rise in the number of accidents has made it imperative to enhance the financial security of the family in the event of an eventuality. A basic term plan will provide death benefit but in case of accidental death, the applicability of this rider will boost the insurance coverage. Thus, after opting for this rider, the family of a policyholder will receive the accidental death benefit in addition to the sum assured of the standard term plan. 
  2. Critical Illness Rider: 
    As the name suggests, this rider is designed to offer coverage in the event of diagnosis of a critical illness namely heart attack, cancer, stroke, kidney failure, etc. Such critical illnesses can not only cause emotional trauma but can also create a big dent on your savings as the treatment for such ailments is very expensive. Therefore, attaching a critical illness rider to your base plan can help you to enhance the cover of your base plan. The benefits of a critical illness rider are as under:
    • In the event of diagnosis of any of the pre-defined critical illness under policy document, the insurance company shall provide the critical illness benefit in a lump sum. This sum can be utilised for the treatment of any critical illness.
    • This rider can also cover for loss of income caused due to diagnosis of critical illness
  3. Permanent and Partial Disability Rider: 
    As the name suggests, this rider is designed to cover the loss whether temporary or permanent caused due to an accident. Accidents can cause temporary or permanent disability that results in loss of income additionally the cost of treatment for disability is high. So, to cope with the loss of income and to overcome the treatment cost attaching a permanent and partial disability rider is the best bait. This rider will help you and your family deal with difficult situations. Based on the level of disability or accidental dismemberment, the sum assured or a percentage thereof is paid to the policyholder. However, in case of permanent disability, many insurance companies also waive off the future premiums of a policyholder without discontinuing the policy.


For example, here is a sample schedule of benefits to explain the same from Exide Life Accidental Death, Disability and Dismemberment Rider

Death and Dismemberment% of Sum Assured paid as Benefit
Death100% of the Sum Assured is payable
Thumb and index finger on same hand25% of the Sum Assured is payable
Any one limb50% of the Sum Assured is payable 
Two limbs or more100% of the Sum Assured is payable 
Disability% of Sum Assured paid as Benefit
Loss of speech25% of the Sum Assured is payable
Loss of hearing in both ears50% of the Sum Assured is payable
Loss of use of any one limb50% of the Sum Assured is payable
Loss of use of two limbs or more100% of the Sum Assured is payable
Total and Permanent Disability100% of the Sum Assured is payable
  1. Waiver of Premium Rider: 
    Waiver of premium riders is beneficial when due to unprecedented situations like accidents or disability results in loss of income. Thus, the waiver of premium rider will come to the rescue. By attaching this rider to your base plan, your future premiums of the policy will be waived off while the policy will remain active. Additionally, the death benefit is also paid as per the terms and conditions of the policy. With this rider, the insured does not have to worry about the premium payment in an unprecedented situation.
  2. Accelerated Death Benefit Rider: 
    Accelerated Death Benefit rider is designed to cover the loss caused due to terminal illnesses like Cancer, Leukemia, AIDS, etc. Under this rider, the insurance provider will offer 50% of the sum assured in the event of diagnosis of terminal illness while the remaining 50% is paid to the nominee in the event of the death of the insured. This rider offers double benefit i.e. it partially takes care of the treatment cost and additionally the insured can plan financial security of the nominee as the partial amount is paid after the demise of the insured. 
  3. Income Benefit Rider: 
    As the name suggests, this rider acts as an income substitution measure for the family in the event of the death of the insured. In a situation where the insured is the sole bread-winner of the family and in the occurrence of untimely death, the income benefit rider will rescue the family from the financial distress. By attaching the income benefit rider to the base plan, the family is eligible to receive the death benefit along with a certain fixed percentage of sum assured is paid as monthly income to the family. With an income benefit rider an insured can make arrangements of monthly income for specific years i.e. 5 years – 10 years, thereby giving ample time to the family members to settle themselves financially.

How do Term Insurance Riders work? (Example with premium, sum assured/coverage, claim process, tax benefits)

Term Insurance Rider Premium Calculation

Term insurance riders are attached to the base policy so the insurers often suggest the premium amount as one. Calculation of term insurance rider premium is based on a lot of factors like:

  • Age of the Insured
  • Sum Assured Opted
  • Policy Tenure
  • Premium Payment Frequency
  • Premium Payment Term
  • Occupation of the Insured
  • Medical History
  • Unhealthy habits like smoking, alcohol, etc.

The cost of rider varies with the terms of the policy and insurance provider. Additionally, some of the riders are in-built within the term insurance plans while others are to be purchased and added to the vanilla term plan (standard base plan) by paying an additional premium. However, the rider premium and rider sum assured is less than the term insurance premium and the insurance cover offered under the base plan.

Who Should opt for Riders with Term Insurance? 

Riders are add-ons used to expand the coverage of your term insurance policies; however, it is very important to understand which term insurance rider to attach to the base policy in order to avail the highest benefits. Here is a list of most common riders and how you can benefit the most from them.

Name of the RiderParticulars
Accidental Death Benefit Rider
  • This rider is activated in the event of the death of the insured due to an accident. This rider is best suited for individuals who:
    • Commute daily using your own vehicle like car, bikes, scooters, public transport, local trains, etc.
    • Frequently travels in flight for work or travel purpose
    • Works in manufacturing industry or is a civil worker working on construction site
Accidental Total and Permanent Disability Rider
  • This rider is activated in the event of disability of the insured permanent or temporary due to accident. This rider is best suited for individuals who:
    • Commute daily using your own vehicle like car, bikes, scooters, public transport, local trains, etc.
    • Frequently travels in flight for work or travel purpose
    • Works in manufacturing industry or is a civil worker working on construction site
Critical Illness Rider
  • Illness is an unexpected and uninvited event. This rider is suitable for individuals who:
    • Have a medical history of illness which are serious in nature like Blood Pressure, Diabetes, etc.
    • Is a frequent smoker or consumes alcohol
    • Has a lot of work stress
Waiver of Premium
  • Waiver of premium allows the insured to not pay further premiums if he/she suffers from permanent or total disability. This rider is suitable for individuals who:
    • Commute daily using your own vehicle like car, bikes, scooters, public transport, local trains, etc.
    • Frequently travels in flight for work or travel purpose
    • Works in manufacturing industry or is a civil worker working on construction site
Terminal Illness Rider
  • If the insured suffers from any terminal illness wherein the expected lifespan is 6-12 months, then the sum assured is paid out to the insured/nominee on diagnosis without waiting for the death so that the amount can be utilised to meet the medical expenditure
Income Benefit Rider
  • When the payout on death of the insured is not provided in a lump sum, but on a month on month basis to the nominee to be able to provide for ongoing monthly expenditure

What are In-built Term Insurance Riders?

Life is unpredictable and being ready to face the uncertainties is the best way ahead. A term insurance plan is one such tool with which you can plan for the financial security of your loved ones in your absence. Additionally, you can boost your basic term plan with an add-on rider that will amplify the benefit to be received by the nominee in the occurrence of an unfortunate event. Notably, many of the leading insurance providers are offering in-built term insurance riders in their base plan. 

For example – a critical illness rider is an add-on which can be attached to the basic term plan, or it can be availed as a stand-alone policy or many insurance providers offer it as an in-built feature whereupon the diagnosis of any of the predetermined critical illnesses. Kotak Life Term Life Policy offers 3 variants:

  • Life Option offers a sum assured on Death
  • Life Plus Option Offers sum assured on death and the accidental death benefit (in-built rider i.e. additional death benefit is offered in the event of death due to accident)
  • Life Secure Option offers a sum assured on death PLUS accidental death benefit PLUS waiver of premium on total and permanent disability.

The in-built term insurance riders is the benefit offered by insurance companies to offer maximum insurance coverage to their customers.

Best Term Insurance with Riders in India (2022) 

Term insurance plan is the best way to tackle the uncertainties of life. Being a pure life cover, the term insurance plan only offers death benefit.  However, team it up with relevant riders, it becomes a robust and comprehensive insurance coverage that can help safeguard you and your loved ones in times of distress and financial medical emergencies. The following is a list of best term insurance plans with riders in India 2022.

Sr. NoName of the Insurance ProviderName of the Term PlanClaim Settlement RatioRiders Available
1Life Insurance Corporation of IndiaLIC Tech Term97.79%LIC’s Accident Benefit Rider
2ICICI Prudential LifeICICI Prudential iProtect Smart Term Plan98.58%Terminal Illness + Waiver of Premium on permanent disability + Accidental Death Benefit + Accelerated Critical Illness Benefit
3SBI LifeSBI Life eShield95.03%

Inbuilt Accelerated Terminal Illness Benefit 

SBI Life – Accidental Death Benefit Rider

SBI Life - Accidental Total & Permanent Disability Benefit Rider

4HDFC LifeHDFC Click 2 Protect 3D Plus Term Plan99.07%

HDFC Life Income Benefit on Accidental Disability Rider

HDFC Life Critical Illness Plus Rider

5Max LifeMax Life Online Term Plan Plus99.22%Max Life Accidental Death & Dismemberment Rider
Max Life Waiver of Premium Plus Rider
Max Life COVID19 One Year Term Rider
6Kotak MahindraKotak eTerm97.40%Kotak Permanent Disability Benefit Rider
Kotak Critical Illness Plus Benefit Rider

A good claim settlement ratio (CSR) suggests that the company is sensitive towards insured claims. It is denoted in percentage that indicates the ratio of successfully settled claims by the insurance company  against the total number of claims registered with the insurance company during a financial year.

Term Insurance Rider Tax Benefits 

Yes, you can claim tax benefit for term insurance rider in the following manner:

  • If your term insurance plan includes health-related riders like critical illness rider, accelerated death benefit rider, etc. then you can avail tax benefits for the premium paid towards the rider premium.
  • The tax benefit for term insurance riders is available under section 80D of the Income Tax Act, 1961.
  • You can not only avail tax benefit for the rider premium paid for your own policy but can also avail tax benefit for the rider premium paid for the term policies of spouse, dependent children, and parents.
  • The tax benefit available for term insurance rider is as under:
    1. The maximum tax deduction for the premium paid for self, spouse and dependent children: INR 25,000
    2. For premiums paid for parents’ policy, an additional tax benefit you can avail is of INR 25,000
    3. For premium paid for parent’s policy aged above 65 years, the additional tax benefit available is INR 50,000

Term Insurance Riders FAQs

  • 1. Should you take riders with term insurance?

    Riders are add-on insurance cover that enhances the scope of your term insurance plan. Buying a rider is recommended as it covers the risk that is beyond the scope of the primary term insurance plan. For example, a critical illness rider that offers insurance coverage for dreaded illness. Buying a rider makes your term insurance plan more comprehensive.
     

  • 2. What is Term Rider?

    As the name suggests, a term rider is an additional benefit that can be attached to an insurance policy where the nominee receives an additional amount in the event of the death of the insured.
     

  • 3. What is an accidental death benefit rider in term insurance?

    An accidental death benefit rider is a common add-on rider which can be attached to the base policy .With this rider, in the event of the death of the insured due to accident, an additional amount apart from the sum assured of the base plan is paid to the nominee. The nominee can receive the entire sum assured either in a lump sum or in a monthly manner as per the instructions given by the insured at the time of buying the policy.
     

  • 4. Should we take riders with a term insurance plan?

    Yes, it is recommended to take riders with a term insurance plan as it makes the base insurance coverage more comprehensive and robust.
     

  • 5. What is the most important reason for opting for a rider with a term insurance plan?

    Riders are the cheapest way to expand coverage. So, the cost effectiveness of the coverage expansion is the most important reason for opting for a rider to enhance your coverage with a term insurance plan.
     

  • 6. What types of riders are available with LIC term plans?

    Life Insurance Corporation of India has designed riders covering most of the undesirable events of life. These riders are designed to offer insurance coverage in difficult times. The following  types of riders are available with LIC term plan

    • New Term Assurance Rider
    • LIC’s New Critical Illness Rider Benefit
    • PWB Rider
    • LIC’s Premium Waiver Benefit Rider
    • LIC’s Accident Benefit Rider
    • LIC’s Accidental Death and Disability Benefit Rider
       
  • 7. What is a term rider with a LIC term plan?

    The term rider with a LIC term Plan is an add-on cover that provides life cover in the event of unfortunate death of the insured during the policy tenure. With the term rider, the nominee can receive an additional death benefit at a nominal cost. 
     

  • 8. What are the riders offered with HDFC term insurance?

    HDFC offers a wide range of riders which can be attached with the base policy to make the insurance coverage more comprehensive. The following  riders are offered by HDFC life insurance company with their term insurance plan:

    • Accelerated Death Benefit Rider
    • Accidental Death Benefit Rider
    • Accidental Disability Rider
    • Critical Illness Rider
    • Income Rider
    • Waiver of Premium Rider
       
  • 9. What if I can’t pay rider premium at the time of renewal?

    If you cannot pay rider premium at the time of renewal of your policy then your rider benefits stand cancelled.

  • 10. How can I cancel the term insurance rider attached to my term plan?

    Yes, you can cancel the term insurance rider attached to your term plan at the time of renewal of the policy.

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