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Life Insurance Riders
Some life insurance companies offer a wide range of life insurance riders while others offer only a select few. If you need a specific rider or would like to talk with a professional about your options, please give us a call today.
What is a life insurance rider?
A life insurance rider is an additional option or feature of your life insurance that provides added benefits and protection.
When you purchase coverage, you are choosing from among particular types of life insurance.
Each policy is unique in what it offers. And you can enhance the benefits of a particular life insurance policy type by adding additional features in the form of life insurance riders.
Life insurance riders allow customization for your particular needs and wants.
You can use riders to increase your coverage and/or add additional benefits, such as living benefits.
You should be aware of the different riders available to you before you choose your policy since most companies require the rider prior to your policy going in force.
Conversion option rider
This life insurance rider option is available for convertible term life insurance. The majority of all term policies come with a free conversion option.
There is no proof of insurability (i.e. no medical exam or health questions). Your policy is simply converted based on your current age and the rate class you originally qualified for. In most cases you must convert before the end of your term or by age 70, whichever comes first.
This option would be exercised when a person is diagnosed with some sort of disease or condition which would preclude them from getting life insurance or make getting new life insurance too expensive.
Some companies do not offer a conversion rider so it is important to ask if your policy will come with this important feature. The last thing you want is to develop a health condition covered only by a level term life insurance policy that cannot be converted to permanent coverage.
As mentioned previously, this rider is typically no additional cost.
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Spouse insurance rider
Rather than purchase a separate life insurance policy for your spouse, you can buy one single life insurance policy and add a spouse insurance rider.
The spouse insurance rider allows you and your spouse to both be covered under a single life insurance policy by paying a bit more in the form of a life insurance rider.
The benefit to this rider is both you and your spouse have coverage. However, if you happen to separate from your spouse, dividing life insurance after a divorce can be a massive headache.
Price: For life insurance riders, it may be expensive, but it may be cheaper than buying two separate life insurance policies. You might also consider survivorship life insurance as an alternative.
Long-term care rider
There are many life insurance riders that pertain to people who may not die, but wind up needing long term care due to an illness or disability. Perhaps in the future you are in an accident or develop an illness that requires ongoing care—if you have life insurance with a long term care rider, then you’ll be able to tap into your policy's death benefit for cash.
Depending on the long term care (LTC) rider plan you choose, LTC riders attached to a life insurance policy can pay for care in a nursing home, an assisted-living facility, or care at home. Benefit periods vary from two to six years but may also last your entire life.
The LTC benefits will normally begin if the insured is unable to perform two or more activities of daily living (ADLs) for a certain period of time. Benefits may also begin if the insured requires supervision due to a severe cognitive impairment.
Price: varies depending on carrier and plan.
Chronic illness rider
A chronic illness life insurance rider, much like a LTC rider above, pays out a portion of the death benefit in a lump sum or monthly payments if the insured cannot perform 2 of 6 ADL's (activities of daily living). LTC riders are typically superior in the benefits offered to a chronic illness rider.
How a chronic illness rider works is the policy owner can access a portion of their death benefit in a lump sum to cover expenses. There are even chronic illness riders that offer additional benefits, such as the owner receiving a stream of monthly payments up to 100 percent of their remaining death benefit.
Price: varies depending on carrier.
Guaranteed insurability rider
The guaranteed insurability rider allows you to add additional coverage at specific birthdays. Alternatively, you can also add life insurance at specific occasions, such as marriage or the birth of a child.
The coverage is guaranteed, up to a specified amount usually capped at $100,000-$125,000, with no evidence of insurability required. That means you do not have to take an exam or answer medical questions. Rather, you get the new coverage based on your original health class rating.
Price: this is an affordable option that you should consider adding to any permanent life insurance for kids or young adults.
Child term rider
You can add your children to the policy with a rider that allows life insurance for children.
Typical child rider term life insurance amounts range from $1,000-$25,000. The best part about a child rider is you pay the same price whether you have 1 child or 10.
This is a really great option for someone with a large family, rather than buying individual child life insurance on each kid.
Price: This is typically a pretty affordable rider. It varies from company to company.
Accelerated death benefit rider
With the accelerated death benefit, if you are diagnosed terminally ill then your life insurance policy will pay out 25% up to 90% of the death benefit amount depending on the specific life insurance company. The company will typically have a cap of the amount they will pay as well. For example, a company might pay up to 50% of the death benefit amount or up to $250K.
Usually you will need a note from your physician which states you have less than 1 year to live (2 years with some carriers). You can use that money to do whatever you need. Most people find it useful to pay medical bills, hospice, and any other expenses they may have.
Price: Free. An accelerated death benefit rider is normally included in all fully underwritten life insurance policies but check with your agent or life insurance company to confirm.
Paid Up Additions rider (PUAR)
Paid up additions, AKA paid up additional insurance rider or PUA, is a dividend paying whole life insurance policy rider allows the policy owner to purchase paid up life insurance, increasing the policy's cash value and death benefit.
The advantages of the PUA rider is the policyowner can supercharge a whole life insurance policy's cash value accumulation.
Paid up additional life insurance is a great way to leave a legacy for your family because the rider will help grow your policy's cash value and death benefit. So as you age, your death benefit can actually increase.
Price: Companies will charge a small fee taken from your additional payment if you choose to use this rider.
Accidental death benefit rider
You can add additional coverage in the form of an accidental death policy. Since this only covers accidental death and does not cover natural causes (such as heart disease, stroke, or cancer), this life insurance rider is best purchased when the insured is maxed out on the amount of life insurance they can qualify for and he or she need some additional coverage.
Another reason someone might purchase the accidental death benefit rider is if they are traveling and will use a common carrier (plane, taxi, bus, boat) as the company may pay out double if death occurs on a common carrier.
Price: ranges depending on the life insurance company.
Return of premium rider
This is a rider on a return of premium life insurance policy. The return of premium (ROP) rider allows the owner of the policy to recoup all the premiums paid throughout the term of the policy (i.e. return of premium). Either the policy pays out or your premiums paid over the term are returned.
Note: The premium is the amount you pay (usually monthly, quarterly or annually) to keep the life insurance policy active.
Since your premium is returned at the end of the term it is more expensive than term life insurance, but with the added benefit of getting all your premiums back.
Price: Can be pretty expensive. It will vary from company to company.
Waiver of premium rider
The waiver of premium life insurance rider allows the premium due to be waived if the insured becomes disabled. The insurance company pays the premium on the insured’s behalf for the period of time that they are disabled.
This is a great rider for a small business key person or for someone who is using life insurance to fund a buy-sell agreement.
Price: depends on death benefit amount and term length. Generally, it is an affordable rider.
Disability income rider
If the insured becomes disabled, the life insurance company will pay a monthly lump sum to the insured based on the insured's income.
There are two types of disability income riders. One is short term disability insurance. It usually pays out after a short period of time, around 7 days or so, depending on the specifics of your policy.
With long term disability insurance, there is typically a 6 month waiting period, aka elimination period, before any money is paid out. Elimination periods can be longer, which helps lower the premium on disability insurance.
The disability rider typically pays out for 2 years. After that time no more disability income will be paid. There are also disability insurance policies that will pay out for 10 years, or until age 65.
Price: This rider is typically more expensive
As you have quite a few rider options when purchasing a life insurance policy. This isn't the full list, but it looks at some of the most popular additions.
You can use riders to cast a wider safety net. While some of these can come with a hefty price tag, others you can typically add for free.
Knowing your options can help you make the right decision. If you aren't sure which riders you should consider, give us a call and we can help guide you towards the right life insurance policy and rider options for you.