What Is a Life Insurance Rider? Life Insurance Riders Explained

What Is a Life Insurance Rider? How Are They Used? Life insurance riders are optional benefits you can add on top of the normal coverage your life policy offers. For example, you may add a rider that lets you defer your premiums if you become disabled, or another that lets you add more coverage later without a medical exam. Adding a rider to your policy may increase your premium, but the flexibility it offers can be worth the extra cost.

A rider will have an additional charge associated with it in most cases over the standard cost of insurance, but some riders may be free. Riders may be added before the time of the issue or they may be added after a contract has been issued if allowed by the life insurance company. The ability to add a rider after a contract is issued depends on the specific rider rules for each rider at each company, and it varies.

What are the benefits of life insurance riders?

Riders make your life insurance policy more flexible either by adding useful features or extending coverage to situations that a standard policy might not allow. For example, an accelerated death benefit rider will let you take some of your death benefit early if you’re diagnosed with a terminal illness. With a standard policy, your beneficiaries would only receive your death benefit after you die.

Is it worth adding a rider to my life insurance?

It depends on the type of life insurance rider, as well as what you need from your policy. For example, a waiver of premium disability rider may make sense if you have health issues, as it lets you stop paying your premium if you become permanently disabled or lose income due to an illness. However, adding any sort of rider could increase your premium, perhaps significantly. It’s a good idea to quote a policy both with and without the rider you’re considering to see how much it changes your price.

How Does a Life Insurance Rider Work?

When buying a life insurance policy, you should have a conversation with your insurance agent about your financial goals and what you hope to gain from having life insurance. Depending on what additional protections you need, the agent can make recommendations for what riders, if any, are appropriate. Even if you don’t need additional riders, it’s important to understand all the options before making a purchase.

Riders can only be purchased at the time that the policy is purchased. Therefore, policyholders need to know what is available to them before purchasing their life insurance policy.

Riders will raise a policyholder’s monthly or annual premium due to the additional benefit they offer. The amount will vary based on the size of the policy and what the benefit of the rider is. These additional payments will help to cover the cost of the rider should the policyholder exercise the rider in the future.

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Types of Life Insurance Riders

Because life insurance policies vary by the policyholder’s needs, there are many types of riders to choose from. Here are some of the most common insurance riders and the benefits they provide.

1: Accelerated Death Benefit Rider

Also called a living benefit rider, this rider is often included in policies free of charge. The accelerated death benefit rider allows policyholders to take an advance on the death benefit of their policy if they are terminally ill. Some policies have different definitions of terminally ill, but most will give an advance on the death benefit if the policyholder has a life expectancy of a year or less.

Many policyholders will use this benefit to pay for medical expenses or other bills before their deaths. This will help alleviate the financial burden that could be left behind for family members.

2: Critical Illness Insurance Rider

Critical illness riders provide early access to a policyholder’s death benefit to help pay for some bills resulting from the treatment of a critical illness. These illnesses often include heart attacks, strokes, kidney failure and other conditions or events that would significantly limit a policyholder’s life expectancy.

This rider allows the policyholder to use the death benefit before actually dying. However, if you use any of the death benefit before you die, only the remaining balance be paid out to the beneficiaries.

3: Return of Premium Rider

When a policyholder takes out a return of premium rider, it guarantees the return of the full amount that they paid toward their premiums if they outlive their term insurance policy. The cost of the rider will depend on the policyholder’s investment risk.

4: Spousal Insurance Rider

Many people purchase life insurance to help financially protect their loved ones that depend on their income for support. A spouse likely depends on a policyholder financially and typically contributes to household income. By adding a spousal insurance rider, a policyholder can insure the spouse’s life and receive a death benefit if the spouse dies before the policyholder.

5: Child Insurance Rider

Many children don’t need life insurance, but a parent might want to take out life insurance on them via a child insurance rider in case the child dies prematurely. These are a good way to receive a small amount of insurance that would cover the expenses of a funeral and some health care costs in case of an accident.

Unlike other riders, you can add a child insurance rider when a newborn child is at least two weeks old. The rider will expire when the child turns 18 years old. Additionally, child insurance riders can cover all the children in a household rather than be per child.

6: Guaranteed Insurability Rider

Many people choose to take out life insurance when they are young because they know that the cost of life insurance depends on a person’s current age and health. Therefore, they know that they will be able to start laddering their life insurance at the best possible price.

However, the guaranteed insurability rider comes in handy when the person gets married, has a child or has another reason to increase life insurance coverage. The guaranteed insurability rider allows a policyholder to increase coverage without needing further medical examination, therefore locking in the rate that was received when the original policy was bought.

7: Family Income Benefit Rider

When people buy life insurance, they often take their income into account. They may want to provide a specific income for their family for a set number of years after death. This is especially true if they are the sole breadwinner of the family. The family income benefit rider provides the policyholder’s beneficiaries with an amount equal to the policyholder’s monthly income after the policyholder’s death. The cost of this rider is contingent upon how much the policyholder earns and how long the policyholder wants beneficiaries to receive the monthly income.

8: Waiver of Premium Rider

The waiver of premium rider is one of the most common riders. This rider states that if the policyholder becomes completely disabled and can no longer work, their premium payments will be covered for the remainder of the policy or the person’s life. This rider helps to prevent a lapse in coverage if a person is no longer able to make premium payments.

9: Long-term Care Insurance Rider

Many people purchase long-term care insurance to cover their nursing home or in-home care costs later in life. People can buy a long-term care insurance rider instead to help cover some or all of a policyholder’s long-term care costs.

Life Insurance Riders Are Useful

Some people think that life insurance riders are just a way for the insurance company to make some extra money from the policy, which is true otherwise they would not offer them, but they also can offer very useful services to the policy owners.  The additional coverage provided by some disability riders, and the option to purchase additional life insurance at the same health rating as the original policy provided by the guaranteed insurability rider has significantly improved policy owners peace of mind and quality of life.  At Life Ant, we believe it is important that our clients understand each rider fully and weigh the pros against the added cost of the rider.

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