Why insurance riders make claims easier

Rita Thakur is wiser now.

After coughing up Rs 100,000 as part-payment for a car accident because she did not have a depreciation rider, she has been diligently buying a zero-depreciation rider each time she renews her motor insurance policy.

"Though the total bill was Rs 350,000, the insurance company refused to pay Rs 100,000 because my car was four years old," says Thakur.

There are several such riders that most policyholders don't buy because of diverse reasons.

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But the most important aversion is cost. Riders are additional covers purchased with a policy.

The Insurance Regulatory Development Authority has capped the premium for riders at 30 per cent of the base policy.
K G Krishnamoorthy Rao, MD & CEO, Future Generali India Insurance, feels opting for the riders can help ensure that a customer isn't stuck with the limitations posed by an insurance policy, like Thakur was. 

Motor insurance (zero-depreciation rider): In case of motor insurance, a zero-depreciation rider can be a good option.

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Even when one buys a comprehensive car insurance policy, fixed deductions for depreciation on particular parts like rubber, plastic and so on set in from the seventh month of purchase of the car -- older the car, higher the depreciation rate.

In case of an accident, the insurance bears the cost when damaged parts need to be replaced.

Motor insurance (return to invoice): A return to invoice rider insures the entire value of the car. If there is an accident and the car needs to be replaced, the insurance company will be liable to pay the entire cost.

Amitabh Jain, vice-president -- customer service motor, ICICI Lombard, says, "Buying the RTI add-on would bridge that gap, since it will ensure the customer gets paid the original amount quoted on his invoice."

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The other two riders that one can take include inconvenience cash and no-claims bonus.

The first one allows policyholders to get cash benefits when the car has gone for repairs. The other ensures that if one has not claimed beyond a certain amount -- usually Rs 10,000 -- he/she can continue to get the benefits of no-claims bonus.

Health insurance (accident cover): Individuals up to 35 years should take an accident death or disability benefit.

For total and partial disability, these policies provide payment of a proportion of the benefits to the insured till he recovers.

A waiver of premium benefit can also be provided, if you have dependants.

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"A health plan provides the same benefits like personal accident cover to a great extent. Nowadays, a few plans have a cap on certain covers. So, an add-on becomes important," says Deepak Yohannan, CEO, MyInsurance.com.

A couple of other useful riders include a hospital cash rider, which allows you to claim for expenses like hospital room rent and other miscellaneous cost on hospitalisation. There is a premium waiver rider as well, that helps with children.

Here, future premiums on the base policy are waived if the insured becomes permanently disabled or loses his/her income/life as a result of injury or illness prior to a specified age.

A 'family income benefit rider' provides death benefits and a monthly income (one per cent of the sum assured per month) to the beneficiary in case of death.

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Home insurance (calamity and burglary):  A burglary cover (for contents only) will take care of up to 25 per cent of the total content sum insured or Rs 100,000 for some insurers, whichever is lower.

Typically, the premium for home insurance is less than one per cent of the actual cost of the contents or structure covered.

Amit Bhandari, VP, health underwriting & products, ICICI Lombard, says, "You can choose to buy insurance for only the building (structure) or only the contents (belongings) or both."

"However, some policies, specially if bought online, are cheaper but offer lesser benefits," says Yohannan.

In that case, you need to buy a burglary and fire and earthquake cover additionally.