Do You Need Add-Ons With Your Term Life Insurance?

If you are the primary earner in your family, it is essential to protect your loved ones financially in case of an unfortunate event. Term life insurance provides a simple and cost-effective solution to this need. So, what is term insurance? It is an insurance plan that ensures your family will receive a sum assured if you pass away during the policy tenure. However, deciding whether or not to add riders to your term plan can be a complex decision.

What is term insurance and what are the advantages of add-ons

Adding riders to your term life insurance policy can provide several advantages:

In the time of need, add-ons can be beneficial:

After realising what is term insurance, it is equally important to know that a basic term plan covers the financial needs of your family upon your demise, certain riders can offer additional benefits. For example, if you meet with an accident and become permanently disabled, riders like accidental disability and waiver of premium on disability can be a blessing. The accidental disability rider provides a sum assured for disability-related expenses, while the waiver of premium rider ensures that you don’t have to pay premiums anymore while the coverage remains intact.

Some add-ons are cheaper than stand-alone policies: Riders such as accidental death and critical illness are available both as stand-alone policies and as add-ons to term life insurance. Choosing these riders as add-ons can often be more cost-effective. Use a term insurance calculator before you buy a policy to know the premium beforehand.

No separate document/medical checkup is needed for an add-on:

When you opt for a rider with your term insurance policy, there is no need for extra documentation or medical examinations. You simply need to declare the riders you want to add, and your premium amount will be determined accordingly. This makes it a hassle-free process, saving you time and effort.

Some riders are not available as stand-alone policies:

Riders with accidental disability may not be available as stand-alone policies. If you specifically require these benefits, opting for them as add-ons with your term plan is the only way to avail of them. Similarly, the waiver of premium rider is exclusive to term life insurance policies.

The disadvantages of add-ons

While add-ons can provide several benefits, it’s important to consider their potential drawbacks:

Riders make the buying process complicated:

Term plans are generally simple and easy to understand—a pure life cover without any maturity benefit. However, once you start adding riders, the buying process becomes more complex. With numerous riders offered by different insurers, choosing the right ones can be overwhelming.

You have to pay an extra premium for the riders:

One of the main advantages of term insurance is its cost-effectiveness. However, when you add riders to your policy, your premium amount increases. For example, if a 30-year-old individual purchases a Rs 1 crore term plan without any riders, they may have to pay around Rs 10,200 per year as a premium. Adding critical illness, accidental death, and accidental disability riders can increase the annual premium to Rs 17,400.

Premium amounts for the riders might be revised later:

While the premium amount for term insurance remains the same throughout the policy tenure, it may not be the case with riders. Insurers have the right to revise the rate for riders in the future. For instance, a critical illness rider may start with a premium of Rs 4,200 per year but could increase after a few years. It’s crucial to carefully review the policy terms and conditions before making a decision.

Coverage amount from term insurance riders can be lower than you seek:

Riders often come with capped coverage amounts. For example, if you have a term insurance coverage of Rs 1 crore, the critical illness cover provided by a rider may only range between Rs 10 lakh and Rs 30 lakh. Similarly, accidental death coverage may be limited to Rs 5 lakh to Rs 10 lakh. If you require higher coverage amounts, riders may not fulfil your needs.

How to make an informed decision

Considering both the advantages and disadvantages of adding riders to your term life insurance plan, it becomes clear that choosing the right riders is crucial.

Assess your specific needs:

Understand your lifestyle, occupation, and potential risks to determine which riders will provide the most value for you. For example, if you have a high-risk job or engage in activities with an increased risk of accidents, opting for accidental death and disability riders would be beneficial.

Conclusion

Now that you know what is term insurance and how add-ons can enhance the coverage provided by it, it’s time to make informed decisions. Evaluate the benefits, costs, and specific needs before opting for any rider. To ensure you choose the right term plan and riders, use a term insurance calculator to assess premiums based on your desired coverage amount, tenure, and additional riders.

As you navigate through the process of securing your family’s financial future, remember that add-ons offer increased protection and customisation. By selecting the right riders with your term life insurance plan, you can have peace of mind knowing that you’ve made an informed decision for your loved ones.