There are many myths and misconceptions about insurance plans. These misconceptions can be cleared off with proper knowledge and understanding of policies in order to decide and plan for the future better.
Because only through some sort of accident or health condition will we start to see the real benefits of buying insurance, we won’t be able to see for ourselves how a money crunch can really affect our lifestyle until something bad happens.
So now, a lot of people actually think that they can avoid buying any coverage until they have a “feeling” that something is wrong.
The irony is that if everyone start making this dreadful decision, then no one would ever get benefits from insurance policies on time.
Insurers want their investors to enjoy a better life and get good returns for their investments. To give these benefits they offer riders to their clients.
In the past, I can imagine that riders were first created to fill up little gaps contained in policy plans that clients wish to cover. But as times moved on, policies themselves are conceptualized with intentional coverage gaps so that insurers can increase revenue by pushing riders through their sales funnels.
As we would have it, riders then became lesser and lesser comprehensive, and we now have to purchase multiple riders for full coverage.
Like many misconceptions about elements and policies of insurances, there are misconceptions about the meaning and use of riders too.
Riders have two meanings depending on type of insurance
In insurance policies the word ‘rider’ has two uses, which many people do not know. If you are considering a health plan, then riders mean some limitations in the coverage plan, mentioned in the policy documents, owing to temporary health issues at the time of buying an the plan.
These riders are normally active for one year, and they limit the insured person to get coverage against an existing condition for a year, which was prevalent during buying of the policy. Normally after a year the rider waves off automatically.
But when we are talking about life insurance plans, riders are to give benefits to the insured.
You can buy a rider, which means added benefits to maximize the coverage of your life policy both on quality and quantity.
There are several types of riders like the return of premium rider, disability rider, and long term care rider.
All of these riders are extra coverage plans to give added benefits to the insured on paying of extra premium. The common misconceptions related to a few riders are explained below.
Return of Premium Rider misconceptions explained
The Return-of-Premium or ROP rider is purchased to ensure that all premiums paid till the maturity of the policy, is returned back to the insured, in case the insured lives up to the maturity of the policy.
Many people think that it is always a wise decision to buy a ROP rider. But, that is a misconception.
You should gauge your risk tolerance first before buying a ROP rider and may consider investing the extra amount at some other place in case you have higher risk tolerance.
Such an option is more for security and stability.
Everyone will have some form of preferred scenario should we pass on within a predicted time frame. But in the modern world with great medical advancement, we sometimes forget that the average living age is increasing, especially in developed countries.
When your focus is purely on a financial sense, you can easily obtain a greater return for your money via other investments.
Disability rider misconceptions explained
Young people may think they have less chances of being disabled due to a disease, and thus they do not consider buying this rider.
However, a disability rider may prove beneficial at all ages, as there is absolutely no guarantee that you won’t be affected by any accident or illness throughout, and in such a case all your future premiums will be waved off though you will get all policy benefits.
Thus, it’s always good to know more about the policy you will be buying beforehand to become a victim of misconceptions and myths.
The truth is, we will never know how much relief insurance coverage can mean to us until something bad actually happens.
This is a key selling point that makes us so receptive to financial protection.
What I know for sure is that most people will prefer not having to think about the financial issues when they are lying in a hospital bed recovering from a bad accident or serious illness.