Riders will offer supplemental coverage to a life insurance policy often not built into a standard policy. Some basic types of life insurance riders — like a term conversion rider, are often included for free. But most will cost extra.
A standalone insurance policy will often have more benefits than a standard rider will. But some add-ons could be worth the additional cost, depending on your needs. When purchasing your life insurance policy, it’s best to let your agent or broker help you determine what customizations you need.
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Life insurance riders:
Guaranteed insurability rider
A guaranteed insurability rider allows you to purchase additional life insurance in the future without requiring a new medical exam or health questionnaire.
There will be periods when you can increase your coverage generally every three to five years during “option periods,.” These are windows of time when you can buy more coverage within a predetermined range.
Also, in many cases, you can purchase more life coverage at the time of significant life events, like having a baby or perhaps getting married. Each policy is different, but you can typically purchase additional life insurance until you’re 40 years old.
Waiver of premium rider
A waiver of premium rider will pay your life insurance premiums if you happen to become disabled and unable to work. Some covered disabilities may include permanent illness or severe injury, such as loss of sight.
You’ll most likely need to provide statements from both the Social Security Administration and a physician as proof of your disability, as well as show proof to your insurer every few years that you are still disabled.
You may have some waiting period before this particular rider pays out, usually around six months. By chance that your claim is approved, you’ll be reimbursed for any of the premiums you paid during this waiting period. The carrier will cover your life insurance premiums until you’re no longer disabled or reach a certain age, typically between 65 and 70. Ask your agent about what the age is for your particular policy.
In general, a waiver of the premium rider must be added to a policy at the start of coverage, with no pre-existing disability before you purchase the policy.
Return of premium rider
If you outlive your term life insurance policy, a return-of-premium rider refunds some or all of your premium payments.
A return-of-premium rider is very expensive — it very well could triple the cost of the policy. Also, you typically don’t get a refund for any extra policy fees or other add-ons you paid for.
Although, some carriers are allowing you to use all or half of the refund toward a new policy without needing to take another medical exam if you want to continue your coverage.
Accidental death rider
An accidental death rider will increase the financial payout to your life insurance beneficiaries if you die from a covered accident, like an accidental drowning, for instance. It’s frequently called a “double indemnity” rider because it can double the amount of money your beneficiaries receive.
However, for the extra benefit to payout, the death usually must occur within a set period after the accident, such as 90 days. This rider also comes with exclusions and won’t pay out under certain circumstances, such as death from:
- Mental illness.
- Alcohol in combination with drugs or medications.
This accidental death rider typically comes at a higher cost. It can be added to a term or whole life policy without a medical exam up until you reach a certain age, around 65 years old. Payouts from an accidental death rider may decrease after you reach a certain age, usually around 70.
Please don’t confuse the accidental death rider with an accidental death benefit policy, a different type of stand-alone life insurance policy that only pays out after deaths from covered accidents.
Accidental death and dismemberment, also known as AD&D, insurance will cover both fatal accidents and non-fatal injuries that prevent you from working.
Accelerated death benefit rider
With a diagnosis from a doctor stating you have a terminal illness, the accelerated death benefit rider will allow you to receive part or all of the policy’s death benefit while you’re still alive. Although there are no restrictions on how the insured can use the money, this rider is a great way to pay for treatment or medical care while still alive.
Some professionals often refer to this rider as a “living benefits” or “terminal illness benefit” rider. An accelerated death benefit rider often comes with most policies but now all. So, make sure you ask your insurance professional if it comes with the policy your looking to purchase.
This life insurance rider policy will only cover specific situations, which at times vary by insurer, so be sure to check with your carrier. There must be a qualifying event happen to trigger this rider; some are included below:
- Terminal illness diagnosis, confirmed by a doctor.
- Some type of organ transplant.
- The continuous need for life support or long-term care.
- A permanent move to a nursing home.
Most life insurance carriers include an accelerated death benefit rider on their policies at no additional cost but may charge a fee for you to access the benefit. Of course, any payouts coming from this rider will be subtracted from the policy’s total death benefit once the insured dies. So, for example: if you receive 100% of your policy coverages face amount from an accelerated death benefit rider payout, your beneficiaries will not receive any death benefit. , if you have built up a cash value on your policy, it may also be reduced.
For the most part, payments are usually tax-free, but there are some exceptions. Also, before using this rider, something to look into is to check and see if it will affect your ability to collect Medicaid or Social Security payments.
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Long-term care rider
A long-term care rider allows access to your life insurance death benefit while you’re still alive if you have a chronic illness and cannot complete your daily living tasks like taking bathing, eating, or getting dressed. These advanced funds you receive can be used however you choose.
Basically, there are two types of long-term care riders:
- Reimbursement riders will pay you back for long-term care expenses up to your policy’s monthly limit.
- Indemnity riders will pay out a predetermined monthly benefit, no matter the actual long-term care expenses you incur.
A long-term care rider is often an accelerated death benefit for long-term care services riders or sold as long-term care coverage.
It’s crucial to understand that a long-term care rider differs from a stand-alone long-term care insurance policy, which does not provide a death benefit to beneficiaries when they die.
Child term rider
As an add-on, you can put a child term rider on a new insurance policy that would cover your children instead of buying separate policies for them. These life insurance riders pay a small death benefit, often between $5,000 and $25,000, if a child would happen to die before reaching the “age of maturity,” usually around 25 years of age. You can expect to pay $25 to $50 per year to add $10,000 worth of life insurance coverage to your policy. The cost will be dependent on the ages of the children.
You can add any biological children, stepchildren, and legally adopted children without the need for a medical exam. Plus, a great benefit is that any children born or adopted after the rider is in place will also be covered.
This particular life insurance rider is tied to the legal guardian’s policy, so if that expires, so does the coverage for the child. You might be able to convert the rider into a permanent policy for your child once they reach the age of maturity, but some restrictions could apply.
Other types of life insurance riders
All insurance companies don’t offer the same life insurance riders, so it’s essential to shop around and find out what is available. Below are some additional riders you could come across:
Spousal life insurance riders payout if the policyholder’s spouse dies but usually don’t offer as much insurance protection as if the spouse had a stand-alone policy. For instance, if the policyholder dies first or if the marriage ends in divorce, the spouse will lose coverage.
Family income benefit life insurance riders will provide a monthly payment to the beneficiaries if the policyholder dies.
Term conversion life insurance riders let you convert a term life insurance policy into a permanent policy, typically without the need to complete a medical exam or show insurability.
Term insurance life insurance riders can also be added to a whole or universal life policy for additional coverage for a certain fixed amount of time.
Disability income life insurance riders provide a monthly income payment to the policyholder if they become permanently disabled. Payouts are usually a percentage of the total policy’s coverage amount.
Cost of living life insurance riders will gradually increase the policyholder’s coverage to align with inflation and the Consumer Price Index. Premiums will also increase.
Critical or chronic illness riders are similar to an accelerated death benefit rider. They allow policyholders to receive money if they’re diagnosed with a critical or chronic illness, including heart attack, stroke, and terminal cancer.
Are life insurance riders worth it?
Believe it or not, insurance companies didn’t create their life insurance riders equal. Some can be a vital component of a life insurance policy, while others cost way more than they’re worth.
For instance, a good term conversion rider will ensure that you have ample coverage even when your policy’s term ends and is a worthy add-on because it comes at no additional cost it’s usually free. However, a waiver of premium rider, on the other hand, is very costly and can be hard to qualify for, which is why most brokers usually don’t recommend it. Whether or not a life insurance rider is worth it depends on your specific life insurance needs at the time of the purchase.
A great way to determine what additional riders you may want to add to your life insurance policy would be to speak with an independent broker like Coach B. about your circumstances. An agent can walk you through all your options and help you find the right one.
Frequently asked questions
What is a rider on a life insurance policy?
A life insurance rider offers extra benefits to maximize your protection for you and your loved ones.
Is it possible to add a rider to an existing life insurance policy?
You should make any rider purchases when buying the base life insurance policy. Talk to the life insurance agent you are working with about what riders are suitable for you and your loved ones at the time of purchase.
What are some of the benefits of life insurance riders?
Life insurance riders enhance the insurance protection that typically isn’t a part of your life insurance policy. One can be prepared for unexpected circumstances like a chronic or terminal illness diagnosis or a sudden disability with a rider.
What are some of the disadvantages of life insurance riders?
The riders that don’t automatically come with your policy for free can be pricey, hard to qualify for, and often not offer enough coverage.
About Coach B.
After starting his financial career with Phoenix Home Life Insurance Company back in 1992, Scott decided he wanted to provide people with an easier and more enjoyable way to buy life insurance. That was the start of Coach B. Life Insurance, whose mission is to be transparent, honest, and helpful to customers — without ever bugging or pushing them.
In the years since then, he has worked tirelessly to improve the process of shopping for insurance. His goal is to make sure that everyone who comes to Coach B. — whether they end up buying a policy or not — has the best possible experience.
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