What are the differences between a CI rider and standalone CI plan?

Hi James,

A CI rider is something that requires a main plan to be active first before it can be added.

So you would need to have a plan of some sort, for example a whole life or a term plan, before you can add a CI rider.

Riders come in two forms, accelerated and additional. An additional CI rider pays out a benefit in the event of a CI, but does not reduce the benefits of the main plan. An accelerated CI rider pays out a benefit in the event of a CI, and reduces the benefits of the main plan. In the event that the benefit of the main plan reduces to 0, the main plan will terminate.

So for example, if you have a $100K term plan (death/TPD) with a $100K accelerated CI rider, the plan terminates if you make a CI claim as the main plan's benefits are reduced. If your rider is additional, and you claim on CI, only the rider's benefits are reduced, and you are still covered for death/TPD. Now, if the CI rider is on a plan with cash value, then it is very possible that an accelerated CI payout will also include part or all of the cash value, so the payout will be higher than the sum assured.

Now, on the topic of a standalone CI plan; such plans are typically designed for maximum payout on CI. For example, multipay plans or single payout early CI plans. So far, such plans are term plans which means that they will require payment of premiums unless the plan has ended due to the coverage duration being reached, or the payout being given, or a waiver of premiums due to a payout being activated. Such plans won't have any cash value so the payout is pretty much the sum assured (or a % of the sum assured, depending). It's also possible that the death benefit of the plan is very low; for example, there are stand alone CI plans on the market where the death benefit low (e.g. $5K only), but the payout in the event of CI is the full sum assured (e.g. $100K).

Ultimately, a deeper understanding of the various plans, their coverage scope, payout structure, etc, will enable you to find the best plan that suits your needs. No plan on its own is good or bad, but rather the plan that suits what you are looking for, will be the best plan.

A CI rider is usually added on to a basic plan (usually term life or whole life), and more often than not, is accelerated (meaning any CI claim will reduce your basic plan sum assured accordingly).

For instance, if you are covered for $200k for a Death and TPD plan, and added on a CI rider (accelerated) for $150k, then in the event you are diagnosed with CI, your CI payout of $150k will then reduce your Death and TPD coverage by $150k accordingly, leaving you with a remaining of $50k of sum assured for Death and TPD.

This is not to say that all CI riders are accelerated, there are some that are not (a.k.a non-accelerated, additional or standalone rider).

Standalone CI plans on the other hand covers solely CI (though usually there will be a small token sum included for Death as well), and is meant to primarily cover you for CI only.

For this purpose, CI riders are generally cheaper to add on for the same amount of coverage compared to standalone CI plans. In fact some insurance companies also give discounts to the CI rider that the clients add to the basic plan. I like to think of CI riders as an "upsized" arrangement in this case, where clients are given the option to upgrade for a discounted price since they are already buying a "meal" (the basic plan in this case).

Cheers.

- Jeffrey (jeffreyleezq.com)​​​