What Life Insurance Riders Do I Need?
Now that you’ve done your research, you know what type of life insurance you need, how much coverage is sufficient, and what questions will be asked, you’re on your way to get the policy that’s right for you.
You may have even started reading reviews of life insurance companies, to help you decide which company will win your business.
But are you fully prepared? You may think so, but if you haven’t yet done your research on the life insurance riders you can add to your policy, you just so happen to be in the right place.
Riders are a great way to get additional coverage at no or low cost compared to getting coverage individually (if available).
Here, we discuss the types of riders offered and how they can benefit you and your family so you can make the best decision to satisfy your needs.
All life insurance riders, unless specifically listed, must be chosen at the time of the application. Once the policy is issued and in force, it is likely too late to add.
Accelerated Death Benefit Rider aka Critical Illness Rider
You will be happy to know that most life insurance policies come with this rider built in at no extra cost.
In the event you as the Insured are diagnosed with a terminal illness and given 12 months or less to live, you can access some or all of the death benefit during that time period to use however you want.
This can be a saving grace to many in terms of financial worry.
A few examples of how the money can be used:
- Pay bills so your spouse can take time off work to spend with you or care for you
- Help pay for long-term care or hospice
- Preplan and pay for your funeral
Be sure to check with your life insurance company to determine how much of the death benefit is available and what restrictions there might be.
Guaranteed Insurability Rider
This optional life insurance rider provides up to a certain dollar amount of coverage (usually a percentage of your death benefit) that can be elected at certain age milestones without any medical exam or need to prove insurability.
The cost and coverage of this rider vary by company and other factors, so be sure to find out the actual cost and what is covered before you make the decision to add it to your policy.
If you are healthy now and get a good rate, but worry about health issues down the road, electing to add this rider can help make sure you have the option to get additional coverage if your needs change.
This rider is a great option for people who have a family history of health issues later in life or might be adopted and don’t know their family history.
Accidental Death and Dismemberment Rider aka Double Indemnity Provision
You may already be familiar with this rider, also known as ADD coverage. People commonly get this coverage through work and/or might have a small amount through their credit union. AD&D coverage is typically inexpensive as a rider.
If you die in an accident, you will get up to the rider limit paid to your beneficiary PLUS the death benefit. This is why the rider is sometimes referred to as double indemnity.
Dismemberment pays a percentage to the policyholder and is subject to the specific body part(s) lost.
With most life insurance riders, there are restrictions and limits to this clause that should be reviewed and understood when purchasing the policy.
Disability income rider
This is another optional provision that you may already have individually or through work. If you do have it through your job, check to see if you can take it with you if you leave or are fired, before deciding to opt out of this coverage.
If you are determined by a doctor to be disabled, whether the event happened on or off the job, you will get the agreed upon amount paid to you by the insurance company for the time you are disabled or up to the policy limit, whichever comes first.
Rates for adding this coverage depends on your job risk and the coverage amount you need. If you are interested, get a quote with the coverage to compare costs.
Waiver of Premium Life Insurance Rider
Similar to the disability rider above, if a doctor determines you are disabled and you have this coverage on your policy, the insurance company will waive your premiums for the time you are disabled.
This protection ensures that your life insurance stays in force and does not get canceled while you are not working due to your disability.
It does not provide any money to you directly and will not pay for any other bills besides your life insurance premium.
The cost depends on your base rate and the disability has to occur after the policy is already in force. The rider automatically expires at age 65. Disability time frame prior to submitting a claim varies, as well as documentation requirements, by each company.
Family Income Benefit Rider
This provision is one that you tend to not see very much as a rider option, so check with the life insuracne company to see if they offer it.
Think of this rider as an insurance plan for your insurance plan. The policyholder elects a specific amount of coverage, typically a percentage of the death benefit, to be provided to their family for a length of time up to the policy expiration.
Consider a father who takes out a 30-year term $250,000 life insurance policy. He adds the Family Income rider to pay 1% to his family in the event he passes away. In year 10 of the policy, he does pass away. Now, his family will receive $2,500 monthly income for the remaining 20 years until the policy expires.
One important note on this rider is that the beneficiary will not receive the death benefit until AFTER the family income rider is exhausted.
Return of Premium Rider
This life insurance rider is only available on term policies.
If the insured outlives their life insurance policy, they will receive the premiums that they paid for the life insurance.
The cost of the rider itself is not refundable. For instance, say you have a 10-year term life insurance policy that costs $50 per month, $10 of that is for the return of premium rider. Even though you paid $6,000 over the life of the policy, you will only receive $4,800.
It is still might be a good deal, as without this rider you will receive nothing back if you outlive the insurance policy.
Term Conversion Rider
If you decide to add this optional rider to your policy, it allows you to convert part or all of your term life policy benefit into a whole life insurance policy without having to go through underwriting or another medical exam.
Similar to the guaranteed insurability rider discussed above, if you don’t know about your family medical history or it isn’t favorable, this might be a good option to have in order to secure more life insurance if your situation changes and warrants more coverage.
There may or may not be a cost for this, and you can only do it at certain ages or milestones in your term life insurance policy. Be sure to get the details from the life insurance company before submitting your application.
Long-Term Care Rider
Electing to add this life insurance rider to your policy might be a better option for some rather than getting an individual long-term care insurance policy.
If you as the insured end up needing long-term care either at home or in a facility, this rider will pay you a predetermined amount that can be used to pay for your care and supplies.
Coverage amounts, length of time, age at issue, and cost all vary from company to company. You should also check to see if there is a waiting period and if there are any limitations on how you can use the money.
If this rider is used, any amount paid to you will reduce the death benefit amount paid to your beneficiary once you die.
You may want to get rates for an individual policy to compare the coverages, limitations, and rates to see if the rider makes financial sense.
Spouse Term Rider
Whether you decide to get a term or permanent life insurance policy, you have the option to add a term policy for your spouse.
The rate, coverage limit, and time period vary by product and company. The most you will be able to get is the same death benefit and term limit you have. Some companies only offer a spouse rider up to 20 years even if you have a 30-year term policy.
It’s always a good idea to get a quote for your spouse to have their own policy to compare rates, but a term rider could potentially be cost savings compared to having a second policy.
Children’s Term Life Insurance Rider
This rider works the same as the spouse term rider but allows for term coverage for your child or children. The cost is the same no matter how many children you have, and biological, adopted and stepchildren are able to be covered.
The child or children to be covered at the time of application must be at least 15 days old to be eligible. Children who are born or adopted after the policy is issued and in force are automatically covered once they reach 15 days old, but you still need to contact your insurance company with their name and date of birth to be listed.
A child’s coverage automatically ends on their 26th birthday. Most companies will then allow you the option to convert the policy to another in the child’s name up to the coverage amount of the rider without going through an exam.
So there you have it, all you need to know about life insurance riders. While some companies may offer some one-off type riders, these are by far the most popular.
If you are looking for more information about possible life insurance options, reach out to us directly to receive a free quote.