Insurance Riders: Which ones to get?
Here’s a clear understanding of Insurance Riders and which ones to really get for your policy.
What are Life Insurance Riders?
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.
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. Some policyholders have specific needs not covered by standard insurance policies, so riders help them create insurance products that meet those needs. 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.
Here is more information about Life Riders:
Accidental Death
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.
Waiver of Premium
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.
Accelerated Death Benefit
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.
Long term care
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.
Summary
A rider is an insurance policy provision that adds benefits to or amends the terms of a basic insurance policy such as additional coverage. Riders come at an extra cost—on top of the premiums an insured party pays. Riders come in various forms including long-term care, term conversion, waiver of premiums, and exclusionary riders.
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