term insurance plans

A term plan is often considered a good life insurance option for most people because it provides a higher sum assured at lower premium rates. Although term insurance plans are quite popular, many people need to be aware of the various riders available. Riders are essential factors to consider when purchasing term insurance policies, as they can elevate the coverage of your base plan by ensuring additional protection. However, the question that frequently arises in the minds of consumers is which riders should be purchased and how they are beneficial. 

In this article, we’ll look at critical illness riders, which can make a massive difference to your life in times of dire need. 

Critical Illness Riders: An Introduction

A term insurance policy is typically recommended for the family’s sole breadwinner, as it provides a secure financial corpus to the family in the event of the insured’s untimely death. But there may be times when the family needs monetary support, even when the primary breadwinner is alive. One of the reasons for this can be the diagnosis of a critical illness which makes the insured person incapable of providing for the family, in addition to incurring medical bills. 

A critical illness rider can help cover the bills incurred due to health conditions caused by a critical illness. A standard term insurance policy does not provide coverage for the same, so a rider cover, such as a critical illness rider, is highly recommended.

This rider covers major critical illnesses such as cancer, stroke, heart attack, kidney failure, and other diseases. The policy document details out the list of covered critical illnesses, and it is recommended to go through the list to understand all inclusions and exclusions. 

What is the definition of a Critical Illness Rider?

A Critical Illness Rider is a common add-on that makes term plans more comprehensive. Some providers, however, may offer critical illness coverage as a standalone plan. There are two kinds of critical illness riders: accelerated and non-accelerated critical illness benefits. The payment of the rider benefit may result in a reduction in death benefits (as in the base policy) in the accelerated critical illness rider. However, in the case of non-accelerated critical illness coverage, the rider’s benefits are not based on the death benefit. As a result, there is no effect on the base sum assured.

Knowing more about a Critical Illness Rider

The Critical Illness Rider kicks in if a plan holder is diagnosed with any of the illnesses listed in the policy. It pays out a lump sum based on the severity of the disease, regardless of its stage. Cancer, paralysis, stroke, heart failure, organ transplant, bypass surgery, and lung diseases are a few examples of major diseases on this list. The policy’s terms and conditions state that the life coverage can be continued or terminated if a critical illness is detected.

Assume a person has a term insurance policy of Rs 1 crore. He also has a critical illness rider worth Rs 30 lakh. The latter amount will be paid upfront if the person is diagnosed with a critical illness during the policy term. The base cover continues to remain in place even after the benefits under the rider are paid out.

Critical Illness Rider Characteristics

Among the massive benefits of using this rider are the following:

  • Critical illness riders provide coverage for major illnesses
  • In the event of a disability that results in income loss, the rider policy may serve as a source of income
  • This enhanced protection is available for a small additional premium
  • The critical illness riders enhance the tax benefits for the term plans under the Income Tax Act of 1961. In addition to the deductions on your premiums paid under Section 80C, the critical illness rider will help you get additional deductions under Section 80D, which can be up to ₹25,000 (₹50,000 for senior citizens)
  • The payout of a critical illness rider can be obtained as a lump sum all at once

You can always use a term insurance premium calculator to understand how much you will pay for certain coverage. Once done, you can compare term life insurance plans offered by various companies. The online tool will help you calculate the premium amount based on several factors. You can also add in the cost of a critical illness rider and see how it turns out eventually. This will help you plan ahead.

To sum up!

No one can predict when their health might take a turn for the worse, and it is necessary to obtain a rider to remain financially protected from the impact of the same. These policies serve as a financial safety net and supplement standard policy coverage during difficult times. Make sure to add a critical illness rider to your term plan and significantly boost its coverage.