What does an endorsement mean in a life insurance policy?

How do you increase the life insurance element in a bundled plan? You can do this by purchasing a term life insurance rider. A rider is additional coverage to the base policy that provides additional benefits. Life insurance companies offer a range of optional riders that you can purchase for an additional premium depending on your needs. Read for more details on the runners.

A rider is an optional addition to a policy, which is explained in the product brochure. So you can buy a jumper as long as the product gives you that option. Generally, you must choose the endorsement when you purchase the policy. There are a host of endorsements offered by life insurance companies. The most popular are accidental death and permanent disability riders. Under this, if the death of the policyholder occurs due to an accident, in addition to paying the promised life insurance benefit under the basic policy, the policy will also pay an additional sum insured as specified in the addendum. In the event that an accident renders the policyholder permanently disabled, the endorsement will pay the specified sum insured.

Critical illness is also a common rider that pays out a lump sum if the policyholder contracts one of the specified critical illnesses. Other than that, a premium endorsement waiver is very popular with bundled policies. Under this endorsement, if an insured person dies during the term of the policy, the endorsement funds future premiums due. Thus, at maturity, the beneficiary is able to collect the maturity benefits as expected. Bundled plans also offer a term insurance rider to enhance insurance coverage. A term rider is a term insurance policy that pays out the sum insured upon the death of the policyholder. Keep in mind that since most of these riders are defined benefit plans, the benefits are set based on an insured event. Once the endorsement policy is claimed, the endorsement ends; and the basic plan continues on its terms.

Since an endorsement is attached to a base policy, the insurer can save on costs. The benefits of this are passed on to you, and you might end up buying an endorsement a little cheaper than a standalone policy. A quick check shows that a critical illness rider for a 30-year-old male with an insured sum of Rs10 lakh would cost around Rs3,741. While a similar standalone policy would cost around Rs 4,425. The other advantage of an endorsement is that the premiums remain the same and of course it is convenient to manage one policy.

Beware of caveats. Review the benefits of the endorsement in detail and compare it with a standalone policy to understand the coverage, a lower premium in an endorsement could also be due to less comprehensive coverage. Also, keep in mind that since this is a rider policy, it will only continue until the base policy is in effect. So, if you choose to surrender the base policy, you will also have to give up the benefits of your rider. In addition, the coverage of the endorsement is limited in accordance with the regulations. According to the rules, the premium for health-related riders cannot exceed 100% of the premium for the base product and the premiums for all other riders combined cannot exceed 30% of the premium for the base policy. In addition, any rider benefit cannot exceed the amount insured under the base policy.

Catch all the trade news, market news, breaking news and latest updates on Live Mint. Download the Mint News app to get daily market updates.

More less

To subscribe to Mint Bulletins

* Enter a valid email

* Thank you for subscribing to our newsletter.

Earnest L. Veasey