Does having more riders mean better coverage? The more riders I add to my plan, the more coverage I should have, right? Is this a myth or a fact?

There are times when I ask some of my contacts if they know what they purchased for their insurance plan, and their response is, “I think I am fully covered”. When I review their plans, they mostly have a plan with a couple of riders attached. So, the question is: Is having as many riders as possible good for us as consumers?

The main component of a life insurance policy is made up of a base plan with either compulsory riders or optional riders. A compulsory rider is already embedded into the base plan and is usually not removable. Optional riders are supplementary additions that we can attach to the plan. Different types of plans from insurers may offer various types of riders. Life insurance plans, such as a single premium endowment plan, do not offer riders at all.

Here are some examples of what the different types of riders are:

Accelerate Riders (these riders pay out benefits from the base plan):

1. Total and Permanent Disability coverage
2. Critical Illness coverage

Additional Riders (these riders do not pay out from the base plan):

1. Critical Illness coverage
2. Disability Income coverage
3. Hospital Cash benefits
4. Medical benefits
5. Personal Accident
6. Disability/Critical Illness waiver benefit
7. Payor Waiver benefit

From the above example, you will realise that there are many different types of riders, and we rarely question whether we actually need them.

There are pros and cons to having riders attached to our plan.

Firstly, we need to understand the fundamentals of why we need insurance and its purpose. At Havend, our philosophy is that insurance primarily serves as protection.

Secondly, we need to identify what could cause a financial impact in the event of a life crisis (e.g., disability, critical illness, or premature death). At Havend, we focus on protecting against events that would cause a major financial impact on an individual.

Thirdly, since insurance is for protection, we must determine which areas it should cover (e.g., income replacement and/or medical crises). At Havend, our planning framework for insurance distinguishes between temporary needs and permanent needs.

The advantage of having the “right” riders in the plan is that we are well protected, and it aligns with our needs. However, the disadvantage of having too many riders is that it may not be optimal if the riders are redundant and do not fit our needs. This leads to unnecessary spending and wasting resources that could be used elsewhere.

The Bottomline

In summary, we acknowledge that purchasing insurance is a cost to hedge against life crisis events, and we should spend as little as possible to get as much coverage as we need. Therefore, some riders are “must-haves” for income replacement, while others are “nice-to-haves” only if we have spare resources and specific needs.

It is essential to understand our needs and determine if the benefits or features of the riders align with them. By doing so, we can achieve the right protection without unnecessary expenditure, ensuring that our limited resources are used optimally and effectively.

Do reach out to us for a complimentary InsureWell Assessment to find out if you currently are overpaying for riders, you do not necessarily need, based on your individual needs. We promise to tell you if you have enough insurance and if that is the case, you need not purchase any insurance from us.

This is an original article written by Mike Zhang, Lead, Insurance Specialist at Havend.

At Havend, if we are found to have oversold you, we have put in place a Money Back Guarantee (MBG) scheme, so you can trust that we will always prioritise your interests first. Unprecedented in Singapore, learn more about our Money Back Guarantee scheme here.