Ever come across the word “riders” in an insurance brochure, and wondered why it’s there considering you’re not buying motorbike insurance?
Well, “riders”, in insurance lingo, refers to add-ons to an insurance policy. Think “free riders”, except riders aren’t free — you have to pay for them.
Riders are important to learn about, because insurance plans are usually not one-size-fits-all. Knowing what riders to get can really help you customise your plan so you can get exactly the coverage you want.
What exactly are “riders” in insurance?
Riders are essentially additional benefits that can be bought to be added to an existing insurance policy. This allows you to customize a policy to suit your needs, as well as providing you with extra coverage whenever necessary.
Imagine that you’re buying a scoop of ice-cream. You’ll likely be asked if you’d like to add any toppings. That’s kind of what riders are — the extra sprinkles, mini Oreos, fruit or whatever on top of your ice cream.
Sure, you can enjoy a plain ice cream as it is, but while you’re at it, why not get the toppings too, right?
Like ice cream toppings, insurance riders come in all shapes and sizes. Some enhance your coverage, making it more comprehensive and protective, while others are more like fringe benefits. We’ll cover some common rider examples below.
There are many different types of riders, so take your time to understand and decide what you need and what you don’t. You have the option of only purchasing what you think you need.
Important to note: Generally, you can’t buy insurance riders a la carte, any more than you can go into an ice cream shop and buy a drizzle of chocolate sauce.
What can adding riders to my insurance do for me?
Here’s a scenario to help you understand how insurance riders work:
Anya bought an Integrated Shield Plan (health insurance) without riders, while Benjamin bought the same plan with a co-payment rider (costing a bit more).
In a bad stroke of luck, both Anya and Benjamin were admitted to the hospital after a mishap. The hospital bill was S$20,000.
Anya’s hospital bills are mostly covered by her Integrated Shield Plan, but she has to pay something called a deductible (applicable on her first hospital stay per year) plus 10% of the hospital bill. So, she has to pay about S$5,000 using her Medisave or cash.
Benjamin, on the other hand, having opted for a co-pay rider, only needs to pay about 5% of the total bill (that’s S$1,000) out of pocket.
In this case, purchasing a rider significantly reduces any additional expenses incurred by you in unforeseen situations like these.
Sounds too good to be true. Are there any downsides to riders?
Purchasing riders does mean that you’ll be able to have greater coverage in specific areas of your insurance plan, but as we said, riders are not free. It is an additional cost that has to come out of your pocket.
This may affect your monthly cash flow and you’ll have to set aside additional funds when purchasing this premium.
Something to take into consideration before purchasing rider premiums is the increments of the premium as you age — meaning that as you get older, the higher the sum of payment for the rider will be.
In addition, with some types of insurance, once you have made a claim for a rider, your policy may terminate.
However, chosen carefully, riders can really improve your insurance coverage at a low cost. Here are the common riders for two common forms of insurance:
What riders are available for health insurance?
Health insurance helps to pay for healthcare costs in the event of an injury, illness, or disability. It covers your hospital bill beyond your Medisave withdrawal limits, providing you with extra coverage and protection.
All Singaporeans and PRs get basic health insurance, better known as MediShield Life, which subsidizes public hospital treatments. Many of us also purchase Integrated Shield Plan for extra coverage, as it is payable by MediSave (which means not having to fork out cash from your pocket).
Think of it as a double scoop of ice cream: the bottom scoop is MediShield Life and the additional scoop is Integrated Shield Plan (IP).
Once you have an IP, you can also add riders on top of your ice cream to make it even better. A common rider for health insurance include:
- Co-payment riders
Reduces your cash outlay when you are hospitalised, as in the Anya/Benjamin example above.
What riders are available for life insurance?
Life insurance is a lump sum of money that is paid out when the insured person dies, becomes terminally ill, or in the event of TPD (total permanent disability).
Riders can be added onto both term life and whole life insurance plans to expand the scope of coverage beyond the three scenarios above. With riders, you could get covered for events like critical illness diagnosis, personal accidents, etc.
There are many different types of riders for life insurance, but for this article, we will be focusing on term life insurance. Some common riders for term life insurance include:
- Critical illness rider
You get a lump sum payout upon diagnosis of one of 37 critical illnesses covered by insurers. Note that a life insurance plan + critical illness rider is NOT the same as a standalone critical illness insurance plan.
- Personal accident rider
Get a lump sum payout if you are injured or disabled from an accident. This helps replace your income when you are unable to work due to an accident.
- Total permanent disability rider
Some term life insurance plans do not cover TPD automatically, but you can get a payout if you opt for a TPD rider.
- Waiver of premium rider
This rider allows you to stop paying your life insurance premiums if you become critically ill, seriously injured, or disabled.
However, something to take note before you jump on the bandwagon and purchase a rider: After you decide to claim your rider, your term life insurance becomes nullified. If you do not want this to happen, opt for a standalone insurance plan instead (usually at a higher cost, of course).
So should you consider purchasing yourself a rider?
Unfortunately, we cannot make that decision for you. Purchasing a rider ultimately depends on you, your lifestyle, and how much coverage you think is sufficient. However, here are some things you can consider before purchasing a rider:
- Long term affordability
The premiums for riders increase as you age, and remember that all riders are only payable in cash. This means that you will have to set aside a sum of money to pay for your rider for the rest of your life.
- Peace of mind
Purchasing a rider means that you need not worry about the sizable hospitalization fees and costs of treatments if you ever get admitted to the hospital.
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