Say you have decided to opt for a term insurance policy. Well, three cheers for you! That’s a solid financial plan you are putting in place. But now comes the tricky part (other than of course, choosing a suitable term insurance policy, a credible term insurance provider, an adequate sum assured, and a set of lucrative term insurance riders) - choosing a nominee.
Who should be the nominee for your policy - your spouse or ageing parents?
Here is a common concern for all - “If I assign my spouse as the nominee, will he/she offer a part of it to my parents after I get permanently disabled or pass away? If he/she doesn’t, how will they continue with their expenses (medical + regular) based on just their pensions?”
As distasteful as it might sound, this is one truth that you really can’t ignore - it’s not about not having faith in your spouse, just the earnest wish to be unbiased and equally responsible towards both families. (Case in point: Captain Anshuman Singh, a 23-year-old soldier who passed away in a fire in July 2023, left behind a wife and parents. While his wife received the pension amount as she was the Next of Kin, his parents were of the opinion that they had been deprived of what was rightfully theirs. Again - distasteful but true.)
In order to cater to such requirements, life insurance providers have brought forth a term insurance rider called the Family Protect Rider (Parental Care). So, let’s take a closer look into finding the answers to the questions - what is this rider, how does it function, what are its pros and cons, what are the best term insurance plans that offer this rider, and should you opt for this rider?
Read to find out!
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What is the Family Protect Rider (Parental Care) in Term Insurance Plans?
Say you have chosen your spouse as your nominee and have a couple of kids in the family, too. In the event of anything unfortunate happening to you (total and permanent disability following an accident or passing away), this rider ensures that you are not living the financial fate of your parents to the mercy of your spouse.
Under the Family Protect Rider (Parental Care) in term insurance policies, even when your spouse is the nominee, parents receive financial benefits on two fronts -
| The time frame of the benefit | Description of the benefits |
|---|---|
| Immediately | The parents of the insured receive 105% of the premiums paid towards the rider as a lump sum |
| Continued | The insured’s parents receive 0.1% to 0.5% of the rider’s sum assured for the rest of their lives. The % of the benefit needs to be decided during the rider’s purchase. |
The benefits of the rider kick in under 2 conditions -
- If the policyholder is left totally and permanently incapacitated following an accident.
- In case the insured passes away.
However, that’s not all with the Family Protect Rider (Parental Care). In case you are planning to purchase the policy, take a look at a few of the things that you need to remember about this cutting-edge rider -
Things to remember about the Family Protect Rider (Parental Care) in Term Insurance Policies
- Sum assured: The Family Protect Rider (Parental Care) sum assured is over and above the base sum assured.
- Policy availability: The rider is only available with the Bajaj Allianz Life eTouch plan (HDFC also offers a similar rider for free).
- Beneficiaries: In case both parents pass away before the insured individual, the rider will never kick in.
- Premium payment term: The premium payment term for the rider is the same as that of the base plan.
- Sequence of payment to nominees: The monthly income benefit will be offered to the older parent first. In the event of his/her passing away, the same amount will be offered to the younger counterpart.
- Nominees to the policy: Only the parents of the policyholder can be the beneficiaries of this rider.
How does the Family Protect Rider (Parental Care) Work in Term Insurance Plans?
What are the Advantages of Family Protect Rider (Parental Care) in Term Insurance Policies?
- Parents are left financially secure - When you get married, you have a financial obligation towards 2 families - one comprising your spouse and your kid and the other comprising of your parents. Now, while choosing your spouse as a nominee ensures that your kid’s future is well looked after, you also need to keep in mind the financial vulnerability of your close-to-retiring or retired parents with a compromised source of income.
This is exactly why the Family Protect Rider (Parental Care) was launched. This is a significant and primary benefit of the rider.
2. Both lump sum and continued support are offered - The Family Protect Rider (Parental Care) offers two-fold perks - a lump sum disbursal of 105% of the premiums paid towards this rider and a continued financial support of 0.1% to 0.5% (as chosen when opting for the rider) of the rider sum assured for as long as the parents survive. Such financial cushioning helps the parents meet both the short-term and the long-term goals. This is particularly beneficial if you take into account the fact there are high chances of the parents being senior citizens with high medical bills and low-income opportunities.
3. Separate sum assured ensures wholesome protection for both families - The Family Protect Rider (Parental Care) has a sum assured that is over and above the cover amount of the base term plan. Hence, you get 2 separate amounts for each of your families, which can each benefit the members without any compromises.
What are the Disadvantages of Family Protect Rider (Parental Care) in Term Insurance Plans?
- It can only be added at the inception - If you plan to opt for the Family Protect Rider (Parental Care), you must do so when purchasing the base term insurance plan. The rider can’t be added to a plan in the middle of the policy term. So, this has to be a well-thought-out financial plan with no ad-hoc decisions.
- The chances of losing the benefits are higher - Unfortunately, the chances of the policyholder passing away before his/her parents are slim, at best. This rider is to protect the parent’s future financial requirements in the event of something like an accident that leads to total and permanent disability or death from any cause. On the other hand, there’s a high chance that the parents will pass away before the policyholder. In this case, the rider will never get triggered, and the premiums paid will be wasted.
Should you opt for the Family Protect Rider (Parental Care) in Term Insurance Policies?
That’s the million-dollar question now, isn’t it?
However, the answer is quite simple - yes, you must. Despite the downsides of the rider (as any financial product has), the Family Protect Rider (Parental Care) is a unique perk. The rider is comparatively affordable and offers its penny-worth to support your family. Moreover, it doesn’t leave you in an awkward spot to decide which family you should select as your nominee.
What are the Best Term Insurance Plans with a Family Protect Rider (Parental Care)?
Honestly, the Family Protect Rider (Parental Care) is uniquely offered by the Bajaj Allianz Life eTouch plan, and it is supposed to be offered at the insurer’s Smart Protect Goal and ICICI Prudential’s iProtect plan. Additionally, HDFC also has a similar rider in place. Here is a quick comparison between the riders from these two insurers (HDFC Life and Bajaj Allianz Life).
| Features of the Family Protect Rider | Bajaj Allianz Life | HDFC Life |
|---|---|---|
| Free/Paid | Paid rider | Free add-on |
| Payouts | An immediate lump sum payout of 105% of the rider premium + monthly payout (0.1% to 0.5% of the rider sum assured) lifelong | Regular income payout (annuity) for the parents as long as they are alive. |
| Addition of the rider | Can be added during the base policy purchase ONLY | Can be added during the base policy purchase ONLY |
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Conclusion
The Family Protect Rider (Parental Care) brings out a unique opportunity for policyholders to focus on being equally responsible for the financial security of their spouse (and kids) and their ageing parents if something unfortunate happens. This is completely aligned with the basic purpose of term insurance plans, which is meant to act as an income replacement for the family in case you are left disabled following an accident or pass away. The sum assured is meant to ensure that your family’s financial goals are met even in the absence of the primary breadwinner. However, if you are just thinking about the accidental disability event, you might as well opt for a Waiver of Premium and/or an Accidental Total and Permanent Disability Rider - the benefits will be multiplied.
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