Common Life Insurance Riders
Life insurance policies ensure your loved ones will not be financially stricken in the event of your passing. Lots of unpredictable changes can happen during a person’s lifetime, and life insurance policies are there to help cover some of those changing needs. Let’s explore some life insurance riders that can protect policyholders and those closest to them in the wake of unexpected events.
Guaranteed Insurability Rider
A guaranteed insurability rider ensures that you will be able to buy additional permanent life insurance without proof of insurability in the future.
You can purchase a specified amount of coverage on a specified policy anniversary date, usually in 3- to 5-year periods. Another option the policy may provide is the ability to purchase additional insurance due to special life events, such as marriage or having a child.
Guaranteed insurability riders offer additional permanent insurance to your whole life policy and are limited to the policies the insurer has at the time of purchase. You will have an additional premium because it is a new contract. The underwriting process is based on your age when you purchase the additional insurance. Medical exams and health questions are waived.
If you have a universal life insurance policy, a guaranteed insurability rider works differently, due to the flexible premiums with this type of policy. Instead of getting an additional policy, the rider increases the policy’s death benefit, and the premium payments of the policy increase.
Guaranteed insurability riders are good all-purpose riders because they guarantee you can buy more permanent insurance down the line even if you become uninsurable. When the rider provides a new whole life policy, its benefits, like cash value, apply. If you’re considering a whole life insurance policy, this rider is a great option at an inexpensive cost.
Cost of Living Rider
A cost of living rider increases the benefit of your policy to fight inflation. It increases based on an inflation index, and as the index rises, so does the coverage amount without having to prove insurability. These riders can be affixed to whole life and term life policies but are not suitable for universal whole life policies, because they are highly flexible.
This type of rider typically comes in the form of an increasing term policy rider. As the benefit amount of your policy increases due to the inflation index, so do your premium payments. These riders are a good fit if your main concern is survivor protection or creating an estate. These riders ensure that the benefit amount will include a higher cost of living in the future.
Accidental Death and Dismemberment Rider
Accidental death can come solely or include dismemberment in the policy rider. An accidental death rider is called a double indemnity or triple indemnity rider because it provides an extra benefit that is double or triple the policy’s benefit amount. The policyowner must pass away typically within 60 to 90 days of the accident for a payout.
When dismemberment is added to the policy rider, the policy will pay out a portion of the benefit if you lose a limb or your hearing in one ear or eyesight in one eye. The policy will pay the full amount of the benefit if you lose two limbs or become fully impaired.
Death related to illness or disability will not issue the benefit of this rider to beneficiaries. Also, this benefit requires an additional premium, and most insurance companies have an age limit as to when you can add the rider to the policy. These riders may also expire at age 60 or 65.
An accidental death and dismemberment rider is a possible way to double the benefit amount of your policy under certain circumstances. Doubling your benefit amount could be helpful should dangerous circumstances out of your control arise. Not everyone is financially prepared for this, even with a life insurance policy, and that’s why this policy should be considered.
Return of Premium Rider
A return of premium rider is a rider for term insurance policies that returns all or a portion of your premiums if you are still alive at the end of the policy’s term. If the policy is canceled before the end of the term, premiums will not be returned. This rider does not include premiums to the death benefit if paid. If you’re purchasing a term life insurance policy, this rider is a must-have.
Term riders are arranged to pay out extra benefits if you pass away within the rider’s established period of time. A term riders coverage period is separate from the policy it is attached to and can be used for various reasons, such as to guarantee your child’s education or to pay off your mortgage should you pass away before those expenses are covered.
Term riders come in many different forms. The great thing about term riders is you can tailor them to meet your needs and they can deliver a lump sum amount to cover valuable expenses. Attach a term life rider whose end of term is your child’s graduation or your final mortgage payment. These riders should be examined when purchasing any type of insurance.
Additional Insureds Riders
Riders can also be attached to your insurance policy to extend the policy’s coverage to loved ones. These riders are usually term life riders added to a permanent policy and are less expensive than buying another policy. These types of riders include other insured term riders, children’s term riders, and family term riders.
The other insured term rider covers the life of an adult, such as a spouse. These riders are usually purchased for additional coverage while children are young. A children’s term rider is beneficial because once the child reaches the term age, they can convert the policy to a permanent life insurance policy, without proof of insurability. Many children can be added with one policy rider.
A family term rider is similar to a children’s term rider because it adds multiple family members to the policy, such as a spouse and children. All insureds get an equal amount of term insurance, and you can add or remove insureds at any time (with proof of insurability). Children on this rider can also convert the policy to a whole life policy at age 21.
If your family is growing, additional insured riders would be a good fit for you to ensure your growing family is protected and remains protected. Affordability is key because these term policies can be less expensive than buying a separate policy, especially for an adult.
Accelerated Death Benefit Rider
The accelerated death benefit rider provides living benefits. It was created to pay for care should the insured become terminally ill and need financial assistance while living. This rider will allow your policy to pay out all or some of the death benefit in the event you become terminally ill. These benefits are sometimes outlined within the policy itself.
If the accelerated death benefits are used in the insured’s lifetime, any remaining amount of the death benefit will be payable to beneficiaries. To qualify for the benefit, you must prove you have a terminal illness or have suffered a catastrophic accident that resulted in permanent disability requiring long-term care. If your life insurance policy does not already have this provision, this rider is a good option for you.
Long-Term Care Rider
A long-term care (LTC) rider is also a rider that provides living benefits from the policy’s face value or death benefit. It covers expenses for long-term care, such as nursing home care and assisted living for an extended amount of time. Unlike the accelerated death benefit, the long-term care rider becomes payable if you need long-term care for any reason, including chronic illness.
Long-term care riders offer the same type of coverage as long-term care policies but can be a less expensive option. If long-term care later in life is something you would like to prepare yourself for, this rider is a good choice to add to your life insurance policy.
Waiver of Premium Rider
With a waiver of premium rider, premiums are waived if you become totally disabled. There is a waiting period usually up to six months before the waiver applies, and premiums must be paid. After the waiting period, if you are still disabled, the insurer returns those premiums and waives premiums for the duration of the disability.
To qualify for the benefit, you must be totally disabled as defined in the policy. Though the premiums are waived, the life insurance company covers them, and the policy continues to grow cash value. Most of these riders have a maximum age limit, usually 65–70. If you become totally disabled prior to the maximum age, premiums are waived, but afterward, they will not be.
The waiver of premium rider is a popular insurance product on the market. It allows your life insurance premiums to be paid when you cannot work due to a disability. This rider is a good addition to if you are the primary breadwinner and not being able to perform your job would cause a lot of financial strain.
Disability Income Rider
A disability income rider provides monthly income if you develop a disability. The benefits are paid as long as the disability lasts; if you recover, the benefits stop. There is a waiting period of three to six months, and a medical exam by a doctor appointed by the insurer is required to prove total disability. Most of these riders include a waiver of premium in their provisions.
A disability income rider provides added financial assurance for life’s unexpected events. These riders are a good fit for you if you do not have a savings plan in place in the event you cannot earn a living due to a disability.
A conversion rider gives the policyholder of a term insurance policy the ability to convert the policy to a permanent insurance policy before the end of the term. This rider is an attractive option because term life policies are generally less expensive than whole life policies. And you can convert the policy to permanent coverage when your finances improve.