What are Life Insurance Riders?
Life insurance isn’t a one-size-fits-all solution. You have many options to cover your needs, including the ability to purchase additional benefits on a basic life policy. These additional policy benefits are called life insurance riders.
Some riders are automatically included in a policy at no extra cost. Other riders will require additional premium cost. Life insurance rider benefits are available for many needs, from terminal illness and long-term care costs to term insurance coverage of children or of a spouse. With that said, you must meet the conditions outlined in the rider to enjoy its particular benefit.
In some policies, you may blend different riders together, at additional cost. The riders you choose, whether included in the policy or purchased at additional cost, may be used for current or future insurance needs.
Since many life insurance riders mean additional premium to be paid, it’s prudent to be sure you don’t get too much insurance. Knowing the basics of different riders and what they offer is a good starting point. Let’s go more into that now.
Common Life Insurance Riders – What You Should Know
Here are some of the most common life insurance riders you will find. Keep in mind that rider options will vary among policy contracts and insurance carriers. Some rider benefits also vary by state, and in some cases they may not be available for purchase.
Guaranteed Insurability Rider
With this rider, you may purchase additional coverage with no more medical checkups. This rider is also known as a “renewal provision.” The rider will state a specified period in which additional insurance must be bought. One upside of this rider is tied to people aging. As we get older, our health condition is likely to decline. This rider will enable someone to get more coverage without having to show evidence of insurability.
People who have seen big life changes, such as getting married, having kids, or enjoying greater income, may also benefit from this rider. In some cases, a guaranteed insurability rider will renew your base policy when its term is over. Something important to keep in mind is this rider may cease upon reaching a specific age.
Accidental Death Benefit Rider
This rider gives a larger death benefit payout if someone dies due to an accident. The insured must have passed away within a specific period of the accident date. Some insurance carriers specify a 90-day span, but that can vary.
Generally, this rider pays out an additional benefit, upon the insured’s death, that is equal to the policy face amount. That means that the death benefit payout is effectively doubled. With that said, typically this rider isn’t available with certain health conditions or certain hazardous sports. Many insurance companies carry a limited definition of the term “accident” in their contracts. So, be sure you understand what that entails before you purchase this policy rider. This type of life insurance rider may be a good option for households with one primary income earner, or for situations with a group of dependents relying on one income earner.
Children’s Insurance Rider
This rider enables you to add term life insurance coverage on all your children. They may be natural or adopted members of your family. This rider is added onto a base policy at additional cost. The children who would be covered must meet certain age requirements.
Some insurance carriers specify that this rider is available for kids who are at least two weeks old, but less than 20 years old. Be sure to check the rider conditions and consult with your life insurance broker for details. In many cases, the coverage can be coverted to permanent insurance coverage once an insured child reaches maturity.
Spousal Insurance Rider
Just like with the children’s insurance rider, this rider offers term insurance coverage for a spousal partner. It is added onto the base policy at additional premium cost. The rider may end when the insured reaches a certain age. Some riders and some insurance companies specify at age 70. Be sure to check the rider conditions and with your life insurance broker for details.
Accelerated Death Benefit Rider
This rider may allow you to access part of the death benefit. If someone qualifies, they can use a portion of the policy death benefit for living expenses, under certain conditions. An accelerated death benefit rider may be purchased for additional cost. In some life insurance products, this rider is provided at no extra cost. Some insurance companies offer this rider for situations in which a terminal illness will greatly reduce someone’s lifespan.
In the event of a terminal illness, the policyholder may use part of the death benefit proceeds to cover expenses. The trade-off is the insurance company will deduct the amount of the proceeds taken from the death benefit for beneficiaries. It may also charge interest. How “terminal illness” is defined tends to vary among insurance companies. So, be sure you understand how the term is defined in any rider you may be considering.
Long-Term Care Benefit Rider
Just like with the accelerated death benefit rider, this rider allows you to “accelerate” some death benefit proceeds toward long-term care costs. Should an insured need home care or be confined to an assisted care facility, the rider will give payments, often monthly, for expenses. In turn, the payments are treated as policy debts and subtracted from the death benefit that will be given to beneficiaries.
Waiver of Premium Rider
With this rider, future premiums are waived under certain qualifying conditions. This rider may apply if someone becomes permanently disabled, or sustains income losses due to a qualifying illness or injury. If one of these situations do arise, the insured won’t have to pay premiums on the base policy until they are able to work again. Another similar rider is the “waver of monthly deductions rider.” Under this rider, monthly rider charges and fees are waived if the insured becomes disabled for a certain period of time.
These rider options may be worth consideration if your premium amounts are high. In times of financial hardship, a policy may lapse should premium payments prove too costly to keep up. Just like with other health status-related riders, definitions of becoming “disabled” and other qualifying conditions can vary. Be sure you understand what’s involved before any purchase.
Return of Premium Rider
With this rider, you can receive back most of the premium put into your life policy. You pay a marginal premium, and at the term end, premiums are paid back to you in full. Should the insured pass away, their beneficiaries will receive the paid amount. Insurance companies offer many kinds of this rider option. So, just like with any other rider you may be considering, consult with your life insurance broker and make sure you understand them well.
This is just a quick overview of common life insurance riders you can find on today’s market. While they can help fulfill many needs at different life stages, any policy rider benefits should fit well into the scope of your overall financial plan. Working with a financial professional can help you clarify whether any rider benefits may make sense for you.
If you are ready for personal guidance with your life insurance coverage, financial professionals stand ready to help you at SafeMoney.com. Use our “Find a Financial Professional” section to connect with someone directly. And if you need a personal referral, call us at 877.476.9723.