Ch. 12: Whole Life Insurance - Riders

A whole life insurance policy is a life insurance policy that provides financial security to your family for your entire lifetime. It offers a lifetime of insurance coverage protection to you and your family, provided of course all the premium payments are completed on time.

Let’s imagine you recently bought a new house. Now, when you’re designing the house, you’ll obviously customise it as per your and your family’s requirements. Right from furniture to surface textures, from paints to bathroom fittings, etc. - everything will depend on your and your family’s preferences, right?

Similarly, when you’re customising a Whole Life Insurance plan, you’ll come across riders. You can opt for these riders based on your and your family’s requirements.

Riders are optional benefits that are available at a certain extra premium amount. They come into play under specific circumstances, and provide additional financial relief when you or your family face a certain type of financial risk.

What are the various types of riders you can opt for with your Whole Life Insurance Plan?

Let’s find out.

• Accidental Death Rider:

  This rider will pay an additional sum of money to your family in case you pass away in an accident. Please note, in most cases the rider benefit will be paid 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).



• Accidental Disability Rider:

  Speaking purely in financial terms, an accidental disability can have an even more impact on your family than death. Besides a loss in earnings, there will be an increase in lifestyle costs like building up ramps, accessible property, making alterations across the house, etc.
  
  You can protect your family against the financial risks associated with permanent disability by opting for the Accidental Disability Rider with your Whole Life Insurance policy. This rider will pay a certain amount to your family if you get permanently disabled because of an accident.
  
  It is important to note that different insurance companies define ‘permanent disability’ in different ways. For instance, one insurance company defines permanent disability as the inability to perform 3 out of 6 daily work activities like writing, climbing, lifting, etc. Another insurance defines it as an injury that leads to loss of the core functioning of a body part - like loss of both eyes, loss of both feet, loss of one arm and one leg, etc.
  
  You should, therefore, check the policy wordings of the rider before making the purchase - so you’re well-informed!



• Critical Illness Rider:

  If you get diagnosed with a serious disease or a medical condition, like cancer, heart disease, kidney disease, etc. it could drain both you and your family mentally, physically, and financially. The treatment cost of curing these diseases is very high, plus, there will also be a number of other expenses involved such as physiotherapy fees for several months, full-time nursing care, rehabilitation charges, etc. All this, while your source of income is either lost or substantially reduced.
  
  A Critical Illness Rider can be an effective way to insulate your family from the financial risk of a serious disease. It will offer a fixed sum of money in case you are diagnosed with a critical illness mentioned in the policy document while your policy is in force. Generally, there are two types of Critical Illness Riders available with insurance companies.
  
  • Accelerated Critical Illness Rider:
    An accelerated rider will simply pay you an advance amount out of your total base cover. If you use the rider for a certain amount, your base policy cover will be reduced by that amount.
  • Comprehensive Critical Illness Rider:
    Unlike an accelerated rider, a comprehensive rider will not affect your base policy cover amount. The cover amount of the rider is additional to the cover amount of the whole life insurance policy.

  Let us understand both types of riders better with the help of an example.
  
  Suppose Aman has a whole life insurance policy of Rs. 1 Crore and he buys a critical illness rider worth Rs. 20 Lakhs along with it.

  
  

  If he buys an Accelerated Rider -	If he buys a Comprehensive Rider -
  If Aman gets critically ill with a listed disease, the insurer will pay Rs. 20 Lakhs and his whole life insurance cover will be reduced by this amount, i.e., it will be reduced to Rs. 80 Lakhs.	The insurer will pay Rs. 20 Lakhs when Aman is diagnosed with a listed illness. Using the rider won’t affect his whole life insurance cover - it will remain the same, i.e., Rs. 1 Crore.




• Hospital Care Rider:

  In case you undergo hospitalisation for treatment of an illness or injury that is medically necessary, this rider will pay a daily cash benefit for each day you are hospitalised. The benefit, however, will only be payable if you are admitted to the hospital for a period of at least 48 hours.
  
  The Hospital Care Rider comes with two basic conditions -
  
  • Only people aged 18 years and above can opt for this rider.
  • The policy term of the rider should not exceed the policy term of your base whole life plan.
  
  

  Say two friends, Jay and Ash, have opted for this rider along with their Whole Life Plan. Jay gets admitted to a hospital for 5 days for treatment of heart disease whereas Ash gets admitted for 1 day for a cataract operation.
  
  Since the rider benefit will be payable only if the hospitalisation is for 48 hours or more, Jay will get paid a fixed amount for 5 days. Ash, however, is hospitalised only for a day - hence, he won’t get the cash benefit under the rider.




• Surgical Care Rider:

  This rider will offer a fixed sum of money in case you are hospitalised for a minimum period of 24 hours and undergo surgery in India that is medically necessary. The total amount that will be paid under this rider will vary and depend upon whether the surgery you are undergoing is classified as ‘major surgery’ or ‘other surgery’ in the policy document.
  
  Like the Hospital Care Rider, this rider, too, comes with the same conditions -
  • Only people aged 18 years and above can opt for this rider.
  • The policy term of the rider should not exceed the policy term of your base whole life plan.



• Waiver of Premium due to Disability Rider:

  With this rider, all your future policy premiums will be waived off, in case you get injured in an accident so badly that it impacts your ability to earn. This rider will ensure that you continue to enjoy your whole life insurance coverage until the end of the policy term without having to pay any remaining premiums.



• Waiver of Premium due to Critical Illness Rider:

  This rider works exactly like the above rider. The only difference is the premiums will be waived off if you get one of the listed critical illnesses. In case you’re diagnosed with a serious disease that is listed in the policy document, this rider will waive off all the future premiums of your base whole life insurance policy as well as the attached riders for the rest of the policy duration.

Important Note - There can be other types of riders available with whole life insurance, depending on the insurance company and the plan you choose. Read all the relevant policy documents so you’re well-informed before making the purchase!

This brings us to the end of the article. Most insurance companies offer the above-mentioned riders along with the whole life insurance policies available with them. You can opt for these riders by paying a certain additional premium amount.