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

What are Insurance Riders?

This article is updated as of 01/09/2024.

Insurance riders are an add-on insurance coverage to your main insurance policy. An insurance rider provides additional benefits at a cost, also known as ‘premiums’. By adding insurance riders to a policy, you will usually receive your chosen sum assured or a waiver of your main policy when the insured event occurs.

The role of insurance riders is to provide an addtional coverage of insurable events not covered in the main plan or, 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?

Insurance riders are Non-participating,  in short, it means they do not contribute to the cash value of the insurance policy. The premiums 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.

How important are Insurance riders?

Insurance riders are commonly added to provide for addtional health and protection benefits.

The coverage offered by the main insurance policy is often lacking, for example, for term insurance plans, the main plan only covers the basic, which is death and terminal illness at a relatively lost cost.

For participating plans which has cash values, for example, for whole life insurance plans, the premiums for the main plan provides coverage for death and terminal illness too, but the premiums that you pay annually accumulates cash values over the years, forming your surrender value in the future when you have decided to surrender your whole life insurance plan.

Why do we need to add insurance riders into our basic plan?

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 (Open in new window)

Accoringly to Today Online, more than 68% of Gen Z are under insured for critical illness coverage. The Life Insurance Association (LIA) in Singapore in 2022 reported a critical illness protection gap of 74% or S$579 billion for economically active Singaporeans aged between 20 and 69 in Singapore.

Being under insured implies lacking adequate coverage for unexpected events, which can result in significant financial difficulties.

Addressing this gap to ensure comprehensive protection for medical emergencies, accidents, and unforeseen expenses is essential for strengthening one’s financial security.

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 Insurance riders available

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

Read about: Life Insurance, Health Insurance

Types of Insurance riders avaliable

Before we move on to the different types of  insurance riders avaliable to target on different coverages. You firstly need to know there are generally 2 types of insurance riders.

• Accelerated Rider
  • an Accelerated rider accelerates the sum assured from the Death sum assured, which means a claim done on an Accelerated rider will reduce your overall sum assured, hence, an Accelerated rider is usually lower in cost.
• Additional Rider
  • an Additional rider pays out the sum assure without reducing your Death sum assured, hence, an Additional rider is usually higher in cost.

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 of an early, immediate or advanced stage of a critical illness.

Critical Illness (CI) – allows a claim to be made upon diagnosis of ONLY 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.

NOTE: Early Critical Illness rider (ECI) and Critical Illness rider (CI) can be an Additional rider or an Accelerated rider. 

The definition and/ or scope of coverage for Early Critical Illness riders (ECI) and Critical Illness riders (CI) 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

Total and 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 Total and Permanent Disability (TPD) is certified, the sum assured will be paid to the insured.

NOTE: Total and Permanent Disability (TPD) rider is usually an Accelerated rider.

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 objectives 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.

NOTE: Premium Waiver Rider waives off your premiums in the event of a claim, there will not be any sum assured that will be paid out for this rider.

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 provides you with additional coverage for death.

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 Insurance riders for all my Policies?

You may not need insurance riders for all your 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 you stand?