Why it’s important to add endorsements to your insurance policy

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Endorsements, when chosen appropriately, can help you obtain much-needed benefits in addition to the benefits of an insurance policy.

Endorsements, when chosen appropriately, can help you obtain much-needed benefits in addition to the benefits of an insurance policy. Riders can be understood as a supplemental (baby) policy to your main policy that is added to the basic plan benefits. There will be a nominal charge to increase the insurance element of your policy against various unforeseen conditions/incidents.

Riders are usually designed to meet specific needs ranging from additional life insurance coverage to additional benefits in the event of accidental death/disability or hospitalization or critical illness or even additional protection for others life events.

As the name suggests, runners will follow the baseline policy and so it is important to ensure that the runner you opt for adds value to the proposition you opt for.

For example, most of your financial milestones will not change even if you are not there or have encountered an unfortunate event, e.g. your children will still go to college when they turn 17, pursue higher education at 21 , will marry at 25/28, you/your spouse would need financial support for old age, etc. Therefore, the premium waiver is most significant, especially with savings insurance plans. Waiver of Premium is offered as an endorsement with some products, while others also offer it as a product option – in all cases, they serve the same purpose.

Another important impact in life is poor health. Statistics indicate that more than 70% of healthcare expenses in India are out-of-pocket, which means people pay for themselves without any insurance. Such an event can potentially wipe out or drastically reduce your savings that you would have planned for another life event like a child’s education, a child’s marriage, or your own retirement. Thus, opting for medical insurance that reimburses the cost of treatment supplemented by a lump sum critical illness plan / rider that pays a lump sum is strongly recommended.

There are expenses beyond the cost of treatment, including the need for dietary or lifestyle changes or recovering from lost income caused by illness. Endorsements/critical illness plans offered by life insurance companies will pay a lump sum on top of your medical insurance claim, allowing you to easily overcome the financial burden after illness.

Accidental death or disability/dismemberment riders cover specific events caused by an accident. Here again, the benefit payable is added to that payable under the basic plan. During the first years of work, the savings are not sufficient to meet all the liabilities and therefore the financial impact of any unforeseen events due to an accident can be mitigated by accidental endorsements/plans. And last but not least, a Term Rider adds to the amount of life insurance coverage and pays out extra money in the event of death. The temporary endorsement strengthens the insurance coverage and allows the family of the deceased to meet financial debts.

Some products have also started offering these runners as a product feature or option. It serves the same purpose and is worth paying a small extra premium for these benefits, which greatly helps the insured or the candidate in the event of an unfortunate and unforeseen event.

(By Bikash Choudhary, Chief Risk Officer/Actuary at Future Generali India Life Insurance Co Ltd)

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