Thanks to the advances in the insurance sector, often there is more than one option readily available. The Personal Accident Rider or a Critical Condition are included in life insurance policies or as an individual policy. Here’s how to make up your mind to select the best one for you.
Riddhima found herself in a state of confusion. She was shopping for an insurance term plan for life online, and as she was finishing the application, she was offered the option to purchase riders for personal accidents and critical illness for an affordable cost. On first glance, it was apparent that the cost for riders appeared to be low, but she decided to take a moment and consider whether it was worth it to include a rider or buy a standalone accident policy or critical illness policy.
Riddhima isn’t the only one when it comes to this confusion. Every time, people who are looking to buy insurance are faced with this issue. This article will examine the advantages and disadvantages of the question and help you determine which one is the most suitable for your needs. What is the purpose of separate health insurance policies as opposed to. riders in life insurance
In India, it is possible to purchase an insurance policy for life through a life insurance firm that, aside from protecting against death, the policy may also provide you with a rider insurance policy for accidents or critical illness, a waiver of premium, as well as other benefits. Certain life insurance policies don’t provide all riders, so it differs depending on the policy. According to the IRDAI (Protection of Policyholders’ Interests) Regulations of 2002, the amount of premium paid by the rider can’t surpass 30% of the amount for the basic product. The conditions and terms for rider coverage are set out in the policy’s conditions and terms. In one policy, you will be covered for death, as well as for accident and critical illness. This is a great choice to consider.
A different option would be to buy an individual policy to cover an accident or a critical illness. In this case, your life insurance policy can only protect against the risk of death. If you have an accident or a critical illness claim, you’ll be required to make claims from separate policies. This means that you’ll have 3 or 2 policies.
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Comparison between standalone health policies vs. a rider in life insurance
Let us now get to the main question of whether you should buy a separate health insurance policy as opposed to an insurance rider on an insurance policy for life. To answer this question, we will compare the two options using various criteria such as:
1. Coverage extent
If you decide to purchase insurance, one of the first things you must consider is getting the broadest coverage possible at a reasonable cost. Therefore, the first thing to consider is comparing the coverage offered by an accident or critical illness rider on an insurance policy for life to the coverage offered in the standalone policy. A standalone policy generally gives you a more extensive insurance coverage when compared with riders. For e.g. Apollo Munich’s IPA Exclusive plan is one of the only complete standalone policies that protect breaks and fractures. If you are suffering from a critical illness, it is possible to check the list of diseases which are covered by both plans.
One reason that riders aren’t comprehensive is due to the fact that it increases the price. In this case, you will find that the IRDAI (Protection of Interests of the Policyholder) Regulations, 2002 specifically stipulate that the cost applicable to a rider’s accident and critical illness should not exceed more than 100 percent of the base product. Additionally, the rider’s benefit cannot be greater than the sum assured under the base product. Therefore, if your need to insure your life is the sum of Rs. 50 lacs, and your disability insurance is one crore, then you will be unable to get disability insurance for more than Rs. 1 crore. According to the current regulations it is not possible to be able to obtain an insurance policy for disability that is more than the amount of Rs. 50 lacs. This may prove insufficient.
2. Premium
The cost of a standalone policies is likely to be more expensive due to the greater coverage offered as opposed to a rider the case of the life insurance policy. In the case of a standalone policy premiums will increase based on your age while when you have a rider policy the price will remain the same for the duration of the policy.
3. Renewing condition
Individual accident or critical illness policies fall under the jurisdiction of the IRDAI’s Health Insurance Regulations, 2013 This means that the policies, once issued are renewable for the duration of life. Contrary to this the riders will be in effect only for the period of the base Life insurance contract. Therefore, it is possible to comprehend this, consider an example: If you’re aged 30 and you buy a life insurance policy that has a duration of 30 years and it is likely that the insurance coverage (along with the riders attached) will expire at the threshold of age 60. If you need insurance for an illness or disability that is critical at this point it’s extremely difficult to buy a separate policy at that the future. In contrast, if you’ve purchased a standalone insurance policy and keep renewing the policy without interruption insurance companies cannot refuse renewal in your life time.
4. Waiting period condition
If a rider is included in an insurance policy for life accidents and critical illnesses will be covered on the first day and there is generally there is no wait time. However, for standalone policies, there’s an option to wait between thirty to ninety days.
5. Tax benefits
Tax benefits are offered on the premiums paid by riders in accordance with Section 80C/80D under the Income Tax Act, as appropriate. For separate policies, while Section 80D benefits are provided for critical illness and mediclaim policies, there isn’t a tax advantage in the case of accident insurance policies. Therefore, from the perspective of insurance for accidents the purchase of a rider with the life insurance policy provides tax advantages against a standalone accident insurance policy.
6. Documentation and papers
A critical and accident-related insurance rider added to an insurance policy for life transforms your life insurance plan into an all-in-one insurance policy, thereby helping to create a more compact insurance portfolio. Therefore, you have to keep separate policies for each policy or to keep track of separate renewal dates or. For separate policies, it might take a little more work managing the multiple policies.
Coverfox Verdict
In the previous article, we’ve reviewed the advantages and disadvantages of both the riders and policies as a stand-alone policy. Prior to deciding which one is the best, Ridhima should first check her needs. If the main consideration is to buy an insurance policy with greater coverage across every aspect (never be averse to a bit more cost and effort managing several policies) A standalone policy could be the best choice. If, however, she’s happy with fewer coverage and features and focuses more on convenience the rider can take care of the task for her. Whatever the case, it is essential to go through the policy’s wordings carefully to fully comprehend the policy’s options before taking any specific option.
