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Life insurance is important for any family. Term life insurance is especially affordable. Permanent life insurance lasts your entire life, but is more expensive. Both types of life insurance can be customized with add-ons called riders.

Life insurance riders provide additional benefits on top of your standalone policy’s benefits. Some life insurance riders have an extra fee; some are included at no charge. Riders are not a required purchase. Depending on your situation, some life insurance riders are worth the extra cost. Below we review some of the more common life insurance riders and if they are worth adding on to your life insurance policy.

Life Insurance Riders Included Free of Charge

Accelerated Death Benefit Rider

An accelerated death benefit rider gives you access to a portion (or full amount) of your policy’s death benefit if you are diagnosed with a terminal illness. These riders are often referred to as living benefit riders because it provides the insured benefits while they are still alive. Typically, the benefit of a life insurance policy is reserved for the beneficiaries upon the death of the insured.

If you’re diagnosed with a terminal illness and are given a short time left to live, with this rider, you can accelerate the benefits. Insurance companies will require proof of the illness from your doctor, but they don’t dictate how you can spend the money. You can use the money any way you choose.

Example:

Jim is 40 years old and diagnosed with late stage brain cancer. He’s given an estimated six months to live.

He and his family live in Georgia but want to travel to the Mayo Clinic in Minnesota to work with the nation’s top neurologists.

Jim has a $500,000 term life insurance policy with an accelerated death benefit rider. He sends the life insurance company a request to receive $100,000. He and his family decide to move to Minnesota for the time being as Jim gets treatment. The $100,000 allows his wife to take extended leave from work and the ability to rent a house month-to-month.

Accelerating the $100,000 lowers his life insurance policy’s death benefit to $400,000.

While having the rider included on your life insurance policy is usually free, there is a fee to actually use it. The fee is typically $100-250 depending on the life insurance company. However, this fee is minimal compared to the benefits the acceleration may provide.

Is it worth it?

Because this rider is often included at no charge, it’s definitely worth it to have it. If you had one year or less to live, wouldn’t you like the option to receive a portion of your policy’s death benefit to spend in any way you wish? Common things people would use the accelerated benefit for include: trying experimental treatments health insurance may not cover, going on a vacation with your family, or knocking some items off a bucket list.

Term Conversion Rider

A term conversion rider allows you to convert all or some of your term life insurance policy to a permanent life insurance policy. Other than being called a rider, this option is often referred to simply as “convertible term insurance.”

The greatest benefit of a term conversion rider is that it’s guaranteed conversion within the designated time period. This means that as long as you request conversion before the expiration period listed on your policy, you can convert to a permanent life insurance policy no matter what your current health status is. There are no health questions or medical exams required.

While this process is relatively simple, by converting to a permanent policy, your premiums will be approximately 10-15x higher compared to your term policy premiums. Some life insurance companies do, however, allow you to only convert a portion of the term coverage. This option would be less costly.

Example:

Jim is 55 years old and diagnosed with brain cancer. He will begin treatment soon, but his doctors can’t guarantee success.

Jim purchased a 30-year $500,000 term life insurance policy when he was 30 years old, so the policy is set to terminate in five years. The conversion rider terms allow him to convert the policy up until age 70, so he’s well within expiration period.

Jim will be battling cancer for quite some time. Even if the cancer does go into remission, he would no longer be insurable for a traditional life insurance policy once his term is over. He decides to convert $100,000 of the policy.

Jim’s original 30-year $500,000 term policy has monthly premiums of $36.31. When he converts the $100,000 portion, his new permanent life insurance policy will cost $115 per month.

He also keeps his remaining $400,000 term policy that has five years left. The premiums for that policy will drop to $30.54 per month (the cost of a $400,000 policy versus a $500,000 one) for the remaining five years.

Is it worth it?

This rider is extremely beneficial for families whose insured loved ones get diagnosed with a serious medical condition. You may be diagnosed with a terminal illness, but are expected to live past the length of your term policy. You can convert to a permanent product ensuring your family receives a death benefit to cover end-of-life expenses and other bills.

Because this rider is typically included on your term life insurance policy for free, we definitely consider it to be worth it. Not all policies offer a term conversion. When you apply for life insurance through Quotacy, we show you immediately if the policy you choose to apply for includes a free conversion rider—as shown in the image below.

Quotacy term life insurance quoting tool showing term conversion rider

Riders are not a required purchase. Depending on your situation, some life insurance riders are worth the extra cost.

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Life Insurance Riders for an Additional Cost

There are many optional riders for both term life insurance and permanent life insurance policies, but we’ll cover the most common below.

Child Rider

You can add on a child rider when you buy an individual life insurance policy that not only covers the life of your minor children, but it can be converted into a permanent policy later on in life without the child being required to show evidence of insurability.

For an extra $50 per year (on average), a child rider typically provides $10,000 in term life insurance coverage for all of your children under age 18. This is not $50 per child nor is it $10,000 divided between all of your children. No matter how many children you have, for only an extra $50 per year, each of your children is insured for $10,000. If you have more children after buying the child rider, these children are automatically covered under the rider as well.

At first, parents are often hesitant when they hear about life insurance on their child. No parent wants to think about their child dying. But should the worst occur, this inexpensive rider can provide a small amount of money to help with funeral costs.

Thankfully, most children outlive their parents, as it should be. But another benefit a child rider can provide is guaranteed insurability. If a child were to develop a serious medical condition or maybe find themselves in legal trouble causing them to become uninsurable for traditional life insurance, the child rider can be converted into a small permanent life insurance policy that either they can own themselves or you can own. If the rider is not converted, the coverage typically ends when the child turns 25 years old.

For parents with a disabled or special needs child, a child rider you add onto your personal life insurance policy may be the only option available for them. Not all life insurance companies would approve this coverage, but Quotacy works with multiple life insurance companies and can help you find child rider coverage in this special situation.

Is it worth it?

Because a child rider is such a minimal fee, we do recommend any parent with minor children to add this rider when they buy a life insurance policy for themselves. Your Quotacy agent can assist you in buying a child rider when you apply for your own life insurance policy.

Waiver of Premium Rider

For an extra cost, you can add on a rider called Waiver of Premium. This life insurance rider allows you to stop paying your life insurance policy’s premiums if you become disabled and are unable to earn an income, while still ensuring your life insurance coverage remains active.

In order to qualify for the waived premiums, the illness or disability needs to have prevented you from working for a continuous length of time—typically six months. Once medical proof is provided, the rider benefits will start and keep your policy inforce until you’re able to go back to work. The premiums paid on your behalf will not need to be paid back.

Is it worth it?

The cost of a waiver of premium rider varies based on your age, health, occupation, and hobbies. If your lifestyle increases your risk of disability (e.g. you’re an avid mountain climber) the cost of the rider will be higher. The rider may even be unavailable depending on your level of risk.

Cost example for a waiver of premium rider*:

A healthy 40-year-old non-smoking male buying a 20-year $500,000 term life insurance policy can add on a waiver of premium rider for an extra $135 per year. His policy without the rider would cost $349 annually. Meaning if he wants to add the rider to his policy, his annual premium would increase from $349 to $484.

*Example is a quote for Preferred Plus risk class. Your final price may be higher or lower than this quote.

According to the Social Security Administration, more than one in four of today’s 20-year-olds can expect to be out of work for at least a year because of a disabling condition before they reach the normal retirement age. If you’re not able to work for an extended period of time, you may need to cut expenses to meet personal budget requirements. Not having to worry about coming up with the payments for your life insurance policy is a nice thought.

If you have a job or participate in a hobby that increases your risk of becoming disabled, the waiver of premium rider may be something you want to consider. If you have a job that you would simply not be able to perform if you were injured in a specific way, for example if a chiropractor broke his or her hand, this is another situation in which a waiver of premium rider may be higher on your consideration list.

Consider buying an individual disability insurance policy to further protect your income. While the waiver of premium rider protects your life insurance policy, it does not help with any of your other bills or financial responsibilities. Disability insurance will provide you with monthly income if you are out of work for a long period of time due to a disability or illness.

Long-Term Care Rider

A long-term care rider allows you to use all or a portion of your life insurance policy’s death benefit for qualified long-term care expenses. For the most part, long-term care riders are only available on permanent life insurance products, such as whole life and universal life, not term life insurance policies.

Combining life insurance with a long-term care rider may help:

  • Keep you from having to liquidate your assets to pay for your long-term care services
  • Reduce the impact on your family – both in providing care and easing the financial impact
  • Preserve your independence by having funds to pay for in-home care

Figuring out how to pay for long-term care during retirement years is currently a big problem in the United States and it’s just getting bigger. Every day until 2030, 10,000 Baby Boomers will turn 65 and 7 out of 10 people will require long-term care (LTC) in their lifetime due to illness, injury, or a severe cognitive impairment, like Alzheimer’s. And many of these individuals don’t have the funds to pay for the care they need. Retirement savings plans are being wiped out faster than expected.

A traditional long-term care policy is expensive and many individuals (and insurance companies) are turning to long-term care riders as a more feasible option. However, as mentioned earlier, long-term riders are only available for permanent policies, which alone are more expensive than term life insurance policies, so the overall cost is not as inexpensive as other rider options when added to term life insurance policies.

With a long-term care rider, you can receive cash benefits when qualified expenses occur. If you are unable to perform any two of the six ADLs (Activities of Daily Living), or if you experience a severe cognitive impairment, you will qualify for benefits. The benefits received are deducted from your life insurance policy’s death benefit.

Cost example for an LTC rider*:

Jim Sparrow, a healthy 60-year-old man, buys a universal life insurance policy with a long-term care rider that has a total annual cost of $4,874.

Without the LTC rider, this universal life policy costs $4,439 annually. After some quick math, you can deduce that the cost of this LTC rider is $435 per year.

With this rider attached, if Jim ever needs long-term care, he can access the benefits of the rider. With this particular policy, the following features are included:

  • Death benefit of $300,000
  • Maximum $6000 monthly long-term care benefit
  • Option for flexible premiums payments
  • Guaranteed annual interest rate of 2%
  • 100-day elimination period

*Example is a quote for Preferred risk class. Your final price may be higher or lower than this quote.

Is it worth it?

If you are unsure whether you have enough retirement savings to cover long-term care costs and don’t have any other financial product that would help, an LTC rider on a life insurance policy is something to consider. It’s not cheap, but neither are long-term care costs.

Dementia-related diseases will require extensive long-term care. Once a disease like Alzheimer’s is diagnosed, it’s too late to buy long-term care insurance or a traditional life insurance policy with an LTC rider.

Those diagnosed with Alzheimer’s is increasing and unfortunately there is no cure—yet. Scientists also believe it to be hereditary. If you have family members with dementia, you should seriously consider how you will pay for long-term care if you need it. An LTC rider on a life insurance policy or a hybrid long-term care and life insurance product may be your most affordable option. Read more about how to cover the costs of long-term care in our blog: Do You Know How You Will Pay Your Long-Term Care Costs?

Accidental Death Benefit Rider

With an accidental death benefit (ADB) rider, your life insurance policy beneficiary will receive an increased death benefit if you die due to an accident. For example, if you have a $500,000 life insurance policy with a $250,000 accidental death benefit rider attached and you die from a heart attack, your beneficiaries will receive $500,000 (the face amount/death benefit). But if you die as a result of falling off a ladder, then your beneficiaries receive $750,000 ($500,000 death benefit plus $250,000 rider benefit).

The cost of an ABD rider varies by age and the benefit amount you choose. Most insurance companies have a minimum rider benefit amount of $25,000 and a maximum of $500,000 or the policy’s face amount—whichever is lower.

Cost example for an accidental death benefit rider*:

A healthy 40-year-old non-smoking male is buying a 20-year $500,000 term life insurance policy. He also adds on an accidental death benefit rider that would pay his policy’s beneficiary an extra $100,000 if he died due to an accident. His total annual cost is $548.

Without this rider, his term life insurance policy costs $485 annually. After some quick math, you can deduce that the cost of this LTC rider is $63 per year.

*Example is a quote for Preferred Plus risk class. Your final price may be higher or lower than this quote.

Is it worth it?

An accidental death benefit rider does have certain important exclusions to be aware of. It often is not available to applicants who are considered high-risk by the insurance company. This rider’s fine print also normally names certain situations in which the benefit will not be paid out.

These exempt situations can include death as the result of:

  • Suicide or attempted suicide,
  • Committing or attempting to commit a felony,
  • Engaging in illegal occupation,
  • Active participation in a riot, insurrection, or terrorist activity,
  • Operating vehicle while having an illegal blood alcohol content level,
  • Infirmity or disease of mind or body or treatment for it,
  • Self-administration of any drug not prescribed or administered by a licensed physician, or
  • Flight in or descent of any aircraft in which you were a pilot or crew member.

If you have a job or hobby that has increased risk of accidental death, this rider would be beneficial for your family. However, not all occupations and avocations are eligible for this rider. If you’re interested in this rider, let your Quotacy agent know when you apply for life insurance. Your agent will let you know if this rider is an option and how much it will cost for you to add it.

All the previously discussed riders are not always available on all types of life insurance or policies. In addition, while there are some situations in which you can add on a rider post-issue, most riders need to be added on when you first buy the life insurance policy. Talk to your Quotacy agent if you’re interested in adding benefits onto your life insurance policy through riders.

Note: Life insurance quotes used in this article are accurate as of March 9, 2020. These are only estimates and your life insurance costs may be higher or lower.

 

About the writer

Headshot of Natasha Cornelius, a life insurance writer, for Quotacy, Inc.

Natasha Cornelius

Marketing Content Manager

Natasha is a writer and content editor at Quotacy. She is also co-host of Quotacy’s YouTube series. She can't get enough of life insurance and outside of work is also working toward her Chartered Life Underwriter designation. Connect with her on LinkedIn.