What is 'Rider'

A rider is a provision of an insurance policy that adds to or amends the coverage or terms. Most riders add coverages for an additional cost. However, some restrict coverages for named conditions. Standard policies usually leave little room for modification or customization beyond choosing deductibles and coverage amounts. 

BREAKING DOWN 'Rider'

Riders help policyholders create insurance products that meet their specific needs.  For example, in the event of a terminal illness, an accelerated death benefit rider on a life insurance policy would provide the insured with a cash benefit while living. The insured may use these funds in a discretionary manner, such as to increase their quality of life or to pay medical, final, and living expenses. When the insured passes away, the designated beneficiaries receive a reduced death benefit, the face value less the portion used under the accelerated death benefit rider.

Some policyholders have specific needs that are not covered by standard insurance policies. Additionally, requirements typically change over time. Insurance companies offer supplemental insurance riders to customize policies by adding varying types of additional coverage. The benefits of insurance riders include increased savings from not purchasing a separate policy and the option to buy different coverage at a later date.  

Long-Term Care Rider

Long-term care (LTC) coverage is often available as a rider to a cash value insurance product such as universal, whole, or variable life insurance. A rider can address specific long-term care issues. When utilized, the funds reduce the policy's death benefit.  Upon the death of the insured, the designated beneficiaries receive the death benefit less the amount paid out under the long-term care rider. In some cases, the policyholder needs may exceed the total benefit of the life insurance policy. Therefore, it could be more advantageous to purchase a stand-alone LTC policy.  If the LTC rider is unused, the policyholder receives a cost saving compared to the costs associated with purchasing a stand-alone LTC policy.  

Term Conversion Rider

Term life insurance provides coverage for a limited time period, typically 10 to 30 years. At policy expiration, the policyholder is not guaranteed new coverage at the same terms. The policyholder's medical condition could make it difficult or impossible to obtain another policy. A term conversion rider allows the policyholder to convert an existing term life insurance to permanent life insurance without a medical exam. This is typically favorable to young parents seeking to lock in coverage to protect their families in the future.

Exclusionary Riders

Exclusionary riders restrict coverage under a policy for a specific event or condition.  Exclusionary riders are found mostly in individual health insurance policies.  For example, coverage can be restricted for a preexisting condition detailed in the policy provisions.  As of September 2010, the Affordable Care Act prohibited exclusionary riders from being applied to children.  Exclusionary riders can also be found in other types of insurance such as property and casualty.

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