Ch. 10: Riders in ULIP Plan

In the previous article, we discussed how you can customise your Unit Linked Insurance Plan exactly as per your and your family’s requirements. There are plenty of customisation options available with ULIPs, such as premium payment frequency, premium payment models, and so on.

In addition to all these customisation options, a lot of insurers also allow you to choose add-ons, known as riders, with your base Unit Linked Insurance Policy. Let’s learn about riders, the types of riders available with ULIPs, and more - in this article.

Riders are additional benefits that can be added to your base Unit Linked Insurance Plan at a certain additional cost. They offer extra coverage under specific circumstances and help enhance your base policy coverage.

Here are two main benefits of opting for riders with an Unit Linked Insurance Plan -

• No documentation
  You don't need to go through any paperwork or submit any extra documents to the insurance company beyond the ones you've already submitted at the time of buying the ULIP Plan.
• No medical tests
  Besides the medical tests you undergo at the time of taking the ULIP, you don’t need to undergo any separate medical checkups for riders.

Here are some drawbacks of purchasing riders -

• Coverage limitations
  The premiums of a rider cannot be more than the premium of your base Unit Linked Insurance Policy, according to IRDAI regulations. As a result, the amount of rider coverage you can buy will be limited.
• Limited customisations
  There may not be many options for customising the rider to meet your and your family's requirements.
• No cost difference
  There is no substantial cost difference between a rider and a standalone policy available for a similar situation. A critical illness rider, for instance, costs almost the same as a standalone critical illness insurance policy.

• Accidental Death Rider
  
  In case you pass away because of an accidental injury while the policy is active, the Accidental Death Rider will pay an additional sum of money to your family.
  
  For instance, Lakshya purchases a Unit Linked Insurance Plan where he needs to pay a premium of Rs. 50,000 every year. As per the policy terms, the sum assured under his policy will be Rs. 5 Lakhs (10X of the annual premium). Lakshya also buys an Accidental Death Benefit Rider worth Rs. 50 Lakhs along with the ULIP.
  
  6 years after buying the ULIP, he meets with a major accident and dies on the spot. In this case, Lakshya’s nominee will receive the ULIP death benefit as well as the accidental death rider benefit. As per his policy conditions, the death benefit his nominee is supposed to receive will be the higher of the sum assured or the fund value.
  
  Let's assume the fund value under his policy is Rs. 3 Lakhs. Since the sum assured amount is higher than the fund value, Lakshya's nominee will get the sum assured amount as the death benefit - which is Rs. 5 Lakhs.
  
  So, his nominee will receive -
  
  • ULIP Death Benefit of Rs. 5 Lakhs.
  • Accidental Death Rider Benefit of Rs. 50 Lakhs.
  
  

  Please note, most insurers will pay the rider benefit only if the death happens because of the accidental injury within a specific number of days of the occurrence of the accident (usually 180 days).

• Waiver of Premium Due To Critical Illness Rider
  
  This rider kicks in if you’re diagnosed with a serious illness mentioned in the policy document. Once you inform the insurance company about the diagnosis, all future premiums under your Unit Linked Insurance Plan will be waived off. And, you can retain your base policy coverage until the end of the policy term.
  
  For instance, Karan buys an Unit Linked Insurance Plan for a period of 20 years. He is required to pay an annual premium of Rs. 1 Lakhs. He also opts for a Waiver of Premium due to Critical Illness Rider worth Rs. 50 Lakhs along with it.
  
  In the 18th policy year, he's diagnosed with cancer - a critical illness that is listed in the policy document. In this case, the insurer will waive off Karan’s policy premiums for the remaining 2 years. His policy will still remain active - and he can enjoy the cover till the end of the policy duration.
• Waiver of Premium Due To Disability Rider
  
  This rider is similar to the above rider. The only difference is that your premiums will be waived off if you get permanently disabled due to an accident. You can continue to enjoy your base policy coverage until the end of the policy term without having to pay any remaining premiums.
  
  For instance, Riya buys a ULIP for 10 years where the yearly premium is Rs. 75,000. Riya also buys a Waiver of Premium due to Disability Rider worth Rs. 30 Lakhs. In the 7th policy year, she meets with a major accident and loses both her legs.
  
  Because she is permanently disabled, the insurance company will waive off the premiums for the remaining 3 years. Her policy, however, will remain active till the end of the policy term - with all the benefits intact.

In addition to the ones we’ve mentioned above, there may be other types of riders available with ULIPs. Make sure you read all the relevant policy documents so you’re well-informed before making the purchase!

This brings us to the end of this article. Hope this article helped you gain enough clarity on how riders work, and the types of riders you can buy with a Unit Linked Insurance Policy.