Are standalone plans more efficient than term insurance riders

For many people, a basic life insurance plan is sufficient to take care of their family’s financial needs. Thus, they prefer buying term insurance to safeguard their family’s financial future. But many people are confused whether a standalone policy will be sufficient to cover the financial needs of the family.

Before we dive deep into the topic, let us first understand the term insurance meaning. A basic term insurance policy with no rider benefits only provides benefits upon the death of the policyholder. This policy is available in the market for nominal charges and guarantees death benefits to the beneficiaries of the plan.

To enhance the coverage of a term insurance plan, insurers in India also offer riders. A rider is nothing but an add-on benefit over and above the existing term plan. Know that when you opt for rider covers, you have to pay additional premium charges for the enhanced coverage.

Some of the common term insurance riders are as follows.

  • Critical Illness Cover – With this cover, you will receive a lump sum amount when diagnosed with a critical health condition. Many insurers provide a list of critical illnesses covered under the plan. Go through it carefully before you purchase the critical illness cover, as no benefit will be provided if you were to acquire a life-threatening disease that is not covered under the plan.
  • Accidental Death Benefit – In case you die in an accident, this cover pays an additional sum assured amount to the beneficiaries of the policy. The percentage of the additional money received is calculated based on the chosen sum assured and tends to vary from insurer to insurer.
  • Return of Premium – With the return of premium cover, the insurer will repay the premiums paid in case you survive the policy tenure. The amount received acts as the maturity benefit. Know that no death benefits are provided to the beneficiaries if you outlive the policy.
  • Waiver of Premium – This cover ensures that if you are unable to pay the future premiums due to disability or loss of income, the future premiums are waived off. Also, it ensures that term insurance policy remains active until the tenure even if you do not pay the premiums.

Should I buy standalone term insurance or term insurance with rider benefits?

While it is evident that the term insurance riders are quite beneficial as they enhance the coverage of the basic term insurance plan, it is still necessary that you evaluate your financial situation and future objectives when buying the policy.

A few reasons to buy a standalone term insurance plan are as follows –

  • Death Benefits

The primary purpose of a term insurance plan is to provide death benefits upon your death. This amount is given to the beneficiaries mentioned in the policy (your spouse, children, or parents). The family members can use the sum assured amount received as the death benefit in any way they want. That way, the policy ensures that your loved ones are protected financially, even in your absence.

  • Tax Benefits

Another reason why people buy the policy is due to the tax benefits it provides. The term insurance tax benefit is as follows –

  1. The premiums paid towards the policy can be claimed for tax deductions under Section 80C of the Income Tax Act, 1961.
  2. The death benefits received by the beneficiaries are tax-free under Section 10(10D).
  3. You can buy riders later in the future (if needed)

If you expect the bare-minimum from your term insurance plan, a standalone policy is sufficient. However, if the need for enhancing the coverage of the policy arises, you can add the riders at the time of policy renewal. Similarly, if you have purchased a few riders at the time you bought the policy, you can choose to opt-out of the benefit during renewal.

To Conclude

Whether to opt for a standalone term insurance plan or a policy with rider benefits solely depends on the purpose of buying the policy. Hence, it is vital to evaluate your financial and health conditions at the time of buying the policy. It will help you decide whether standalone term insurance is sufficient, or should you opt for any rider benefit.

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