What Are Life Insurance Riders?

Life Insurance Riders Are Add-ons

Life insurance riders are provisions added to a life insurance policy to provide extra benefits or coverage options. You can use these riders to customize your policy.

For example, you may add financial protection for specific scenarios, such as critical illness, accidental death, or disability. Some riders include the option to accumulate cash value or waive premiums if you become disabled.

Keep in mind that adding a rider often includes an extra cost on top of the policy’s premium. The cost typically depends on the value of the extra death benefit or potential cost to the insurer.

Advantages of Life Insurance Policy Riders

Life insurance riders give you greater flexibility. You can alter your policy to better align with your current needs. You get more than just a basic life insurance policy.

Adding riders can also be more cost-effective than buying separate insurance policies for each type of coverage. For example, you can add protection for circumstances not covered by your base policy. Along with giving you more comprehensive coverage, you’re likely to pay less overall.

Commonly Offered Life Insurance Riders

The availability of insurance riders varies depending on the insurance company, the types of policies they offer, and their eligibility requirements. However, the following riders are frequently offered:

• Accelerated death benefit rider
• Accidental death and dismemberment rider
• Waiver of premium disability rider
• Return of premium rider
• Term life insurance rider
• Term conversion rider
• Guaranteed insurability rider
• Spouse and children riders
• Family income rider
• Cost of living rider

Here’s a closer look.

Accelerated Death Benefit Rider

The accelerated death benefit (ADB) rider is often called the terminal illness rider. It allows you to receive some or all the death benefits from your base policy if you’re diagnosed with a terminal illness. The amount that you receive is subtracted from the remaining death benefit that your beneficiaries receive after you pass away.

Some insurance companies also offer versions of the accelerated death benefit rider focused on more specific situations. This includes chronic illness riders and long-term care riders.

Chronic illness riders provide access to the death benefit after being diagnosed with a qualifying chronic illness. This typically includes conditions not considered terminal.

The long-term care rider allows you to use the death benefit to help cover long-term care. The details of how the payouts work vary. For example, some insurers provide a lump sum payment while others offer reimbursement for long-term care expenses.

Accidental Death and Dismemberment Rider

The accidental death and dismemberment (AD&D) rider provides a larger benefit for death due to an accident. In some cases, the death benefit from the rider is equal to the death benefit of the base policy.

For example, if you have a $100,000 whole life policy, the AD&D rider may add an extra $100,000 death benefit for accidental death.

Waiver of Premium Disability Rider

The waiver of premium disability rider waives the premium payments if you’re diagnosed with a qualifying condition.

If your disability keeps you from working, this rider keeps the insurance company from charging you for a certain period or until you can return to work.

The details and length of time that the rider stays in effect vary. For example, some insurers waive premiums for up to two years. It may also only be valid until a certain age, such as 65. After you pass the age limit, the rider becomes void.

Return of Premium Rider

The return of premium rider gives you a refund at the end of a term life policy. It’s a way to recoup some of your money if you outlive the policy, as term life policies have a set length. Common term lengths include 10, 15, 20, and 30 years.

Term Life Insurance Rider

Term life insurance riders allow you to buy extra coverage. It’s typically offered with permanent life insurance policies. You can add more coverage with a set term, which may range from 10 to 30 years.

Term Conversion Rider

A term conversion rider is occasionally available for term life policies. It allows you to convert your policy into a whole life plan near the end of the contract. This may allow you to obtain permanent life insurance at a later age without paying the higher rates that seniors typically pay.

Guaranteed Insurability Rider

The guaranteed insurability rider gives you the option to increase your death benefit later without needing to complete a new medical exam. This rider could save you quite a bit on insurance if you anticipate the need to add more coverage later in life.

Spouse and Children Riders

Many insurance policies include optional spousal riders or children’s riders. These riders allow you to add coverage for your spouse and children. You can add a death benefit that is paid out if the covered family member passes away.

Family Income Rider

The family income rider includes an extra death benefit for your family. It’s typically paid using monthly installments, helping to replace the loss of income if the sole breadwinner passes away. It may be available with a term life policy.

Cost-of-Living Rider

The cost-of-living rider allows you to add coverage over time. This rider is basically included to help protect against inflation. $100,000 in life insurance coverage now may not have the same buying power in several decades. With this rider, you can gradually add coverage to keep up with inflation.

Should You Add Insurance Riders?

While there are many insurance riders to consider, they’re not meant for everyone. You don’t need to add insurance riders to your base policy to secure financial protection for your loved ones.

Insurance riders allow you to tailor your policy to include coverage for specific scenarios, such as being diagnosed with a terminal illness. If you want to extend your coverage beyond the base policy, insurance riders give you the freedom to do so.