Riders are additional benefits that can be bought and added to a basic life insurance policy. They allow you to customize a policy and can provide several kinds of protection if you meet their conditions.
Buying a rider means paying extra, but generally the additional premium is low because relatively little underwriting is required. Here are eight common life insurance riders and what they cover.
- Riders are the extra benefits that a policyholder can buy to add on to a life insurance policy.
- The most common include guaranteed insurability, accidental death, waiver of premium, family income benefit, accelerated death benefit, child term, long-term care, and return of premium riders.
- In general, the extra premium paid for a rider is low because relatively little underwriting is required.
1. Guaranteed Insurability Rider
This rider allows you to purchase additional insurance coverage in the stated period without the need for further medical examination. A guaranteed insurability rider is most beneficial when there has been a significant change in your life circumstances, such as the birth of your child, marriage, or an increase in your income. If your health declines with age, you will be able to apply for extra coverage without giving any evidence of insurability. This type of rider may also provide a renewal of your base policy at the end of its term without medical checkups. Guaranteed insurability riders may end at a certain age.
Insurance coverage, premium rates, terms and conditions of riders may differ from one insurer to another, and when a claim for the benefits of a rider is made, it may result in the termination of the rider, while the original policy continues to provide insurance.
2. Accidental Death Rider
An accidental death rider pays out an additional amount of death benefit if the insured dies as the result of an accident. Normally, the additional benefit paid out on death due to an accident is equivalent to the face amount of the original policy, which doubles the benefit. In the event of death due to accidental bodily injury, the insured's family gets twice the amount of the policy. That's why this rider is called a double indemnity rider. If you are the sole provider for your family, an accidental death rider can be ideal because the double benefit will take good care of your surviving family's expenses.
Make sure you understand the restrictions on an accidental death rider, as many life insurance companies limit the meaning of the term "accident."
3. Waiver of Premium Rider
Under this rider, future premiums are waived if the insured becomes permanently disabled or loses their income as a result of injury or illness prior to a specified age. Disability of the main breadwinner can have a crippling effect on a family. In these circumstances, the rider exempts policyholders from paying the premium due on the base policy until they are ready to work again. A waiver of premium rider can be valuable, particularly when the premium on the policy is high. The definition of the term "totally disabled" may vary from one insurer to another, so be aware of the terms and conditions of your specific rider.
4. Family Income Benefit Rider
In case the insured dies, a family income benefit rider will provide a steady flow of income to family members. When buying this rider, you need to determine the number of years your family is going to receive the benefit. The merit of having this rider is obvious—in case of death, the surviving family will face fewer financial difficulties thanks to the regular monthly income from the rider.
Family income benefit riders are generally purchased by individuals who are the sole breadwinners of their family.
5. Accelerated Death Benefit Rider
Under an accelerated death benefit rider, an insured person can use the death benefits if diagnosed with a terminal illness that will considerably shorten their lifespan. On average, insurers advance a percentage of the death benefit of the base policy to the insured. Insurance companies may subtract the amount you receive, plus interest, from what your beneficiaries receive on your death. Most often a small premium or, in some cases, no premium is charged for this rider. Insurers have different definitions of "terminal illness," so check what the rider covers before purchasing it.
6. Child Term Rider
This rider provides a death benefit in case a child dies before a specified age. After the child reaches maturity, the term plan can be converted into permanent insurance with coverage up to five times the original amount without the need for medical exams.
7. Long-Term Care Rider
In the event the insured has to stay at a nursing home or receive home care, this rider offers monthly payments. Although long-term care insurance can be bought individually, insurance companies also offer riders that take care of your long-term care costs.
8. Return of Premium Rider
Under this rider, you pay a marginal premium and at the end of the term, your premiums are returned to you in full. In the event of death, your beneficiaries will receive the paid premium amount. Insurers sell return of premium riders with many variations so make sure you understand the phrasing of the rider before you buy.
The Bottom Line
Most insurers don't allow you to modify your insurance policy according to your individual needs, but riders can help customize coverage. Always be sure to read the fine print before you add a rider to a life insurance policy. If needed, sit down with an insurance advisor to evaluate the benefits of riders and then buy the one best suited to you and your family.