Life insurance is a tool to protect you and the important people in your life from financial hardship. A great feature of life insurance is the ability to customize it for your particular situation and lifestyle. While you have various types of term and permanent insurance to choose from, you also have policy add-ons to supplement a life insurance policy with more coverage.
These policy add-ons are referred to as riders. Riders vary by insurance company and by policy, as do their workings and costs. Adding riders may increase your premiums so be sure to determine if the extra coverage is worth the cost. There are many riders available across the industry, but we will focus on the most common.
A child rider provides coverage should the death of a child occur. While this tragedy would not result in loss of income, it could still bear financial hardship for a grieving family in regards to taking off work and funeral expenses. The rider would provide financial assistance. Once the child reaches the age of 25, the rider can typically be converted to an individual policy without an exam.
The spousal rider allows you to add-on life insurance to cover your spouse versus owning two separate life insurance policies. Typically, a spousal rider only provides term coverage for a specific period of time.
When purchasing insurance, you may add virtually any form of term insurance to a base permanent policy in the form of a term rider. This would be beneficial to policyowners who have a temporary need in addition to their long-term need.
Guaranteed Insurability Rider/Additional Purchase Option
If added to the purchase of your insurance policy, the guaranteed insurability rider (also called an additional purchase option) guarantees your policy’s renewability at the end of its term. If you decide to renew your policy, you will not be required to provide additional proof of insurability.
This rider is also useful if you want to purchase a permanent policy, but are unable to afford the premiums for large face amounts at that time or think you may need more coverage later in life. This rider gives you the option to purchase additional coverage in the future without evidence of insurability.
Term Conversion Rider
The term conversion rider lets you convert your term insurance policy into a permanent one without undergoing a medical exam. This would be beneficial to younger couples who may decide to have children and want to then convert for life-long coverage. This rider is most often a feature of a term insurance contract that is added to the policy at no cost.
Waiver of Premium Rider
A waiver of premium rider ensures that you would not need to pay the premiums on your life insurance policy should you become totally disabled and can’t work. Most insurance companies limit the policy to age 65. If you are older than 65 and become disabled and are disabled for longer than six months, your premiums will be waived and, depending on the policy, the premiums you were paying for the previous six months will be reimbursed.
Disability Income Rider
A disability income rider allows you to collect regular income from the insurance company if you become totally disabled and can’t work. The policy will specify the amount of income and how long it will be paid and some riders only pay if you became disabled from an accident, while others pay for an accident or illness.
Long-Term Care Rider
The long-term care rider pays benefits should you need home care or care in a nursing home. The maximum benefit is usually a percentage of the policy’s face amount.
Accelerated Death Benefit Rider
The accelerated death benefit rider pays a portion of the death benefit to you (the insured) if you become terminally ill with a short life expectancy. This rider has become a standard in the industry and is usually included automatically for free or offered at a nominal cost. The policy states how much of the death benefit would be available before death and it’s usually capped at $250,000 to $500,000.
Critical Illness Rider
The critical illness rider requires the insurance company to pay you a lump sum if you’re diagnosed with one of the critical illnesses specified in the insurance policy such as: cancer, heart attack, stroke, kidney failure and others.
Accidental Death Benefit Rider/Double Indemnity Rider
The accidental death benefit rider (also called a double indemnity rider) increases the death benefit if you die as the result of an accident. Sometimes this rider also includes additional payment for dismemberment; you would collect money if you lost a limb or your sight. Life insurers do consider your occupation and hobbies when determining these premiums.
Return of Premium Rider
With the return of premium rider, you pay higher premiums for the opportunity to get all of your money back if you live past the term on your life insurance policy.
There are many factors to consider when shopping for life insurance. The amount and type of life insurance you need depends on factors such as income, your dependents, debt, lifestyle, and how much risk you are willing to take. We have covered here the most common types of life insurance riders, but this list is not exhaustive. Life insurance is a very personal decision and should be determined thoughtfully.
No one ever anticipates needing to use life insurance, but the unexpected happens. Be prepared and get a free and anonymous term life insurance quote today.