It is almost very common for most people with protection plans to have some riders attached to their plans. Many times these riders either provide additional protection for the life assured or waive off future premiums in the event the payor falls critically ill or passes away. For today's article, I would like to touch on the protection element of the riders.
What do I mean by additional protection?
Typically riders offering a protection element helps the life assured to 'add on' coverage to a main plan. This main plan can be (but not limited to) a life policy that insures for death or investment-linked policy that also has a sum assured in the event of death. The add on coverage most commonly covers critical illness (ranging from early stage to severe stage, depending on what rider(s) you add) and total and permanent disability. By these additions, it allows the life assured to have a more comprehensive coverage. *please note that there may be other riders other than the 2 mentioned that can be added to protection plans.
So what do people tend to overlook?
Very often, unless the rider is a standalone add on, most of these riders tend to feed off the main plan's sum assured however, most lay people overlook this.
This example is only for illustrative purposes and it's not representative of any insurer's plan nor is it an example of what ideal coverage should be.
If you take a look at the above illustration, the main plan covers the life assured $200,000 in the event of death. The riders cover for situations like advance critical illness and early critical illness and total & permanent disability for $200,000 also. Now, to a lay person, this interpretation might be if the life assured claims for early critical illness, there will still be $200,000 to claim for death, advance critical illness and total and permanent disability. This assumption on most instances is flawed. If the critical illness is not an additional standalone rider, then it means that upon a critical illness or TPD claim, the whole plan ceases.
To help you with your understanding better, here's another example. In this instance, the main plan's sum assured is 1 million. If the life assured claims advance critical illness, there would still be half a million in the policy for further claims.
So what is the potential implication if the plan ceases after a claim on the riders?
Family no longer can claim for death
If this is the life assured's only protection plan, this might mean that the life assured's family will no longer be able to claim any money at the point of the life assured's death.
Life Assured may not be able to buy new coverage
If there is a claim for critical illness or total permanent disability, it's almost certain that the life assured will be denied future life insurance coverage. So if this is the only coverage, it might mean that the life assured will have to depend on his/her savings for future unexpected illness or death.
If you are unsure if your existing plan is structured to cover you after a claim is made, please check with your trusted adviser.
Disclaimer: The content created are based on my personal opinions and may not be representative to everyone or any organisation. If you have any doubts or queries pertaining to insurance or investment, please seek professional advice from a trusted adviser in an official setting. You may also reach out to me if you do not have a present adviser using the message box under 'Let's Talk'.
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