Understanding Riders in Insurance
25 Jan 2016
Riders are essentially add-ons to regular insurance policies and they should help insured customers to get themselves better protected. Eventually, we will find additional set of risks and we will need additional components to improve our protection. In many cases, riders can be purchased only in conjunction with the basic insurance. They can’t be added later. Riders are usually optional and they can provide pure protection against risks. We should be aware that there shouldn’t be any savings or investment elements to riders. Riders can be added to the life insurance policies and they are usually related to health-related risks.
However, riders can also be available on other kind of insurances, such as auto insurance policies. Because riders are often included with the base policy, we shouldn’t get any customer acquisition charges or extra administrative charges. This should lead to a lower cost. Based on the country of state, the maximum amount of premium that can be paid for riders can be around 30 percent of the cost for base policy. Insurance sales agents could compete on prices and consumers could be attracted by low prices. It is obvious that the overall rates will go up when riders are added.
There are different riders that can be added to regular life insurance policies:
- Double-sum insured rider: When this rider is added, specific sum of money is provided to the child or the guardian, if both parents die. Additional amount of money can be given to the child at specific age.
- Critical illness rider: With this rider, an amount of money is given to policyholders if the contract different ailments, such as cancer, renal failure, heart attacks and other illnesses that require large amount of money for treatment. This rider could become more expensive as policyholders get older, because the possibility of contracting severe diseases will increase. For this reason, it is better to purchase the critical illness rider when we are younger.
- Permanent total disability or accidental death rider: With this rider, an additional sum of money is given to the nominee if the policyholder dies. Money will also be given to policyholders if the suffer from permanent and complete disability.
- Waiver of premium rider: This rider is activated when policyholders become financially unproductive, due to diseases and accidents.
There are also riders for auto insurance policies:
- Zero depreciation rider: With this rider, the entire costs of parts can be paid when car owners need to claim them. Parts may include windscreen, bumpers, tires and others. This will make sure that car owners will be able to obtain additional money to keep their vehicles running properly.
- Return to Invoice rider: This rider is activated due to total loss, such as theft or accident. In this case, the car owner will receive the fill invoice value of the car.
It is important for car owners to consider whether they really need extra riders for car insurance. This will make sure that their life and car insurance policies will be more usable.