Insurance riders: Do I need them and are they worth paying for?

What are Insurance Riders?

Riders are an add-on insurance coverage to your main insurance policy. A rider provides additional benefits at a cost, also known as the premium. By adding riders to an insurance policy, you will usually receive a cash benefit or a waiver of your main policy when the insured event occurs.

The role of riders is to provide an overall boost to the health and protection coverage in your Insurance Portfolio. The boost in coverage comes at a small additional cost, compared to the total premium of your Insurance Policy. However, the coverage boost provided may be multiple times of the main insurance policy.

Read about: Managing your Insurance Portfolio

What are the financial returns on my Insurance Riders?

Riders are Non-participating policy and they do not contribute to the cash value of the insurance policy. This means to say, the premium paid is not recoverable in any form or method if the insured event does not materialise. This includes the surrendering or maturity of your insurance policy.

Non-participating policy – Not entitled to any profit of the non-participating funds, serves the purpose of fulfilling its stated benefit should the insured event occurs.

How important are Riders?

Insurance riders are commonly added to provide for health and protection benefits. The coverage offered by the main insurance policy is often lacking, due to most of the premium going towards providing financial returns in the later years.

In Singapore, 37 people are diagnosed with cancer every day with a male having a 17.2% chance of getting colorectal cancer and a female having a 29.2% chance of getting breast cancer. Refer to the full write-up from Singapore Cancer Society. The report in question is only for cancer, 1 of the 37 defined Critical Illness.

Refer to: Common types of cancer: Singapore Cancer Society A(Open in new window)

A separate write-up by AIA Health Survey 2023 findings revealed that 94% of those diagnosed with a Critical Illness find it challenging to take up critical illness coverage. This is despite 41% of them actively looking to purchase coverage.

Refer to: AIA Health Survey 2023 (Open in new window)

Refer to: 3 gaps in critical illness coverage by AIA Health Survey 2023 by The Straits Times (Open in new window)

Now, do you still wish to play a game of chances with health and protection coverages?

Read about: No budget for financial planning?

Types of riders available

The are various riders available for Life Insurance Policy and Health Insurance Policy, which serves different purposes in your Insurance Portfolio.

Read about: Life Insurance, Health Insurance

We break down the types of riders you will encounter in an Insurance Policy:

Critical Illness Riders

There are two types of Critical Illness riders, Early Critical Illness (ECI) and Critical Illness (CI).

Early Critical Illness (ECI) – allows a claim to be made upon diagnosis, during the early, immediate and advanced stage of a critical illness.

Critical Illness (CI) – allows a claim to be made upon the advanced stage of a critical illness.

In Singapore, there are currently 37 defined critical illnesses and the updated list can be found on the Life Insurance Association (LIA) of Singapore. This includes major cancers, stroke, heart attack, kidney failure and more. Critical Illness riders are important as the odds of contracting a major illness increase on a yearly basis.

The definition and/ or scope of coverage for ECI riders and EI riders may vary among insurers. Check the coverage provided by the proposed insurance policy.

Critical Illness riders can be added for: Whole Life Policy, Investment Linked Policy, Term Insurance Policy (Click for more details)

Refer to: List of 37 Critical Illness by LIA (Open PDF in new window)

Total Permanent Disability Rider

A Total and permanent disability (TPD) rider provides a lump payout in the event of said condition. The diagnosis must be confirmed and certified by a Registered Medical Practitioner. Once TPD is certified, the lump sum payout will be paid to the insured.

Total and permanent disability riders can be added for: Whole Life Policy, Investment Linked Policy, Term Insurance Policy, Endowment and Saving Policy, Annuity Policy

Premium Waiver Rider

A premium waiver rider waives the premium for the main insurance policy to which it is attached to. Upon the occurrence of the insured event, the policyholder is not obligated to pay for future premiums. This allows specified financial goals and objective to be realised in the future even when financials changes due to medical conditions.

Consider adding a premium waiver to your policy if you are the breadwinner of the family. This will lessen your dependant’s burden should there be any changes to your health or your life.

Premium Waiver Rider can be added for: Whole Life Policy, Investment Linked Policy, Term Insurance Policy, Endowment and Saving Policy, Annuity Policy

Term Riders

Term Riders can be added to a Saving plan and Endowment policy to provide cover for death. As most Endowment and Saving Policies are Guaranteed Issuance Options (GIO),  little or no coverage is provided. Adding a term rider to your policy increases your death coverage.

However, do note that endowment policies come with a maturity date. The rider will usually terminate upon maturity and the coverage will cease.

Term Riders can be added for: Endowment and Saving Policy

Should I get riders for all my Insurance Policies?

You may not need riders for all your Insurance Policies, however, ensure that your health and protection coverage is sufficient.

At the very least, ensure that your Insurance Portfolio has sufficient coverage among your policies for:

• Death
• Terminal Illness
• Early Critical Illness
• Critical Illness
• Total and Permanent disability

If you have set aside a portion of your income for insurance policies, work out the Health and protection coverage in your insurance portfolio. If Health and Protection coverages are lacking, you might have focused too much on financial returns.

Read about: 3 things to consider before taking up a new financial product

 

Every individual financial portfolio is unique based on personal financial goals and objective.

Like to know more about your current health and protection needs or a portfolio review to see where your stand?

Drop us a message and let us work out a suitable portfolio specific to you.

 

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