Optional Supplementary Benefits

Although insurers primarily provide life coverage to the insured from a life insurance policy, there are often additional benefits associated with life insurance. However, some of these benefits are not part of the basic plan. Where you have the option of tacking on these benefits in exchange for a higher premium, these benefits are ‘riders’ or optional supplementary benefits.

This is different from an insurer packaging a plan that offers a pension plan and life insurance policy in one product. After all, the pension plan is part of the basic plan’s terms and conditions. The rider or optional supplementary benefit is a feature of a life policy that can be removed at any point in time through a contract change. However, it is usually more difficult (and sometimes impossible) to add riders to your policy after the insurer issues it. This is mainly because several details that affect your insurability can change after the life insurer issues the policy.

There are diverse optional supplementary benefits, which vary among insurers. These benefits include (but are not limited to):

a) Waiver of premium/charges
b) Critical illness
c) Disability income benefit
d) Accidental death (also known as double indemnity)
e) Accidental death and dismemberment (ADD)
f) Long term care insurance
g) Guaranteed insurability riders

The idea behind the rider is to enhance the value that you derive from your life insurance package. For example, the waiver of premium/charges rider allows the policy to remain in force even when the policy payer is unable to meet the premium obligations because of loss of income through disability (or other conditions established by the insurer).

In many cases, insurers offer critical illness coverage at a cheaper insurance rate than a stand-alone critical illness plan. Therefore, it could be better to buy critical illness as a rider instead of buying two separate policies for critical illness and life insurance. The Accidental Death rider provides double the sum assured on the life insurance policy for death by accidental means.

Once selected, optional supplementary benefits are covered in the terms and conditions of a particular insurance contract. Therefore, the insurer stipulates to the insured the circumstances and situations under which the riders are in force. For example, you might purchase critical illness coverage but, under the terms of the contract, certain critical illnesses are excluded. For this reason, it is important to scrutinize the details surrounding the riders that you select for your life insurance policy.