What is a cost of living rider? Can this be added to my health insurance policy?
—Anshita Sharma
There are two kinds of cost of living riders. The first is a benefit to account for inflation. Several health insurance products factor this in by giving a no-claim bonus. These no-claim bonuses can vary from 10-50% each year, and will partially address the high medical inflation of 15-20%. This rider is a partial solution because if you have to make a claim, the no-claim benefit will be withdrawn. Also, there is a ceiling—typically 50%—beyond which your sum assured cannot increase. The best solution is to buy more health insurance or a top-up plan over time.
The second type of rider is where a benefit is paid if you suffer a critical illness. This kind of accelerated benefit is more common in life insurance. You can buy a stand-alone critical illness plan, which will help manage your cost of living in case of a serious illness.
