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Life Insurance Riders

What Are Life Insurance Riders?

A life insurance rider, also known as an endorsement, is an addition to a life insurance policy that typically expands the benefits provided by the contract. Riders give you the ability to customize your coverage and add more flexibility to your policy.

Accidental Death Benefit Rider

Accidents happen anywhere, at any age. An Accidental Death Benefit rider provides additional coverage if you were to die in a covered accident. It may even double the amount of the original death benefit (Double Indemnity). In some cases, this rider will also allow for Compensation Payment for loss of a limb or dismemberment. Having this rider attached to your life insurance policy can give your family greater peace of mind in the event of your death due to an accident.

Accelerated Death Benefit/Critical Illness Rider

If you’re diagnosed with a terminal illness while your life insurance policy is in force, this rider enables you to collect all or part of the death benefit while you’re still alive. This will allow you to pay for medical expenses or other additional expenses you incur as a result of your illness. This may take away some of the financial burden on you and your family. (Note: Any early payments received will be deducted from your total death benefit as an early payment. Each insurance company has different rules about how much can be accessed, and how it affects what’s left of your total death benefit. )

Child Protection Rider

This option provides coverage for your child’s final expenses, in case the unthinkable happens. It can be used to pay for funeral or medical expenses, depending on how much coverage you buy. Insuring your child is one of the easiest and most affordable ways to establish a financial foundation and future insurability while they’re still young and healthy. These policies may require that you provide health information for your child, but typically do NOT require an exam

Cost of Living Rider

Some policies offer a Cost of Living rider that links your death benefit to the Consumer Price Index (CPI). This allows for automatic additional coverage, to help counter inflation over the life of your policy. In other words, your family can receive more that the face value of your death benefit.

Disability Waiver / Waver of Premium Rider

Disability Waiver / Rider (Waiver of Premium) is a feature that will pay your premiums if you were to suddenly become disabled. This rider typically has a waiting period of 6 or more months before benefits can be claimed, and typically requires that your disability is renders you unable to perform gainful work. Can you think of any other product that promises that if you can’t make your payments due to being disabled…THEY will make those payments FOR you?

The types of disabilities / injuries covered and length of time to qualify may vary by insurer and product, and are specified in the insurance policy.

Disability Income Rider

If you become disabled and can’t work, you can receive a monthly payments to help replace a portion of your income during the disability. Generally, any ongoing premium payments will typically be suspended until you recover or are able to go back to work. The specifics include the types of disabilities covered, the payment amount, and the length of time you must be disabled before you can collect. These will vary from policy to policy. All of the rules will be spelled out in your documentation.

Family Income Benefit Rider

Upon your death, this feature allows you to set up your policy so that your family or beneficiary will receive monthly payments, rather than a lump sum. This will allow for a steady flow of income vs. a lump sum that will need to be saved or invested. This can be a very valuable provision for people who are not very skilled with handling money.

Guaranteed Insurability Rider

With a Guaranteed Insurability Rider, you have the option to buy additional life insurance at a later date, without the need for a medical exam, and at the same health classification as you currently qualify for. This can be of great value, because as life changes, a sudden disability or health condition could cause you to become uninsurable, or greatly increase your rates for any new or additional coverage. Events like marriage, child birth, adoption, buying a new home, will change our life insurance needs. Most policies have specific limitations and requirements that will be outlined in the documentation.

Long-Term Care Rider

This rider provides you access to a portion of your death benefit, if you reach a stage in life where you require A Long Term Care (LTC). Typically, this requires that you need help with two or more of the Six Activities of Daily Living or you have a severe cognitive impairment (typically this includes Alzheimer’s disease or other forms of dementia). Below is a list of the Six Activities of Daily Living:

  • Eating
  • Dressing
  • Bathing
  • Toileting
  • Continence (the ability to control your bladder and bowel movements)
  • Transferring (the ability to get yourself out of a chair or bed, walk across the room and sit in another chair)

Life insurance with a LTC rider is almost always simpler to qualify for than Long Term Care insurance. And unlike a traditional Long Term Care policy, it can be designed to have guaranteed level premium. About 69% of Americans will need long term care at some point. This rider is a great way to ensure that if you ever have need of long term care, it’s there for you.

Image showing that 69% of all people over the age of 65 will need Long Term Care

(Note: Any Long Term Care payments will be deducted from your total death benefit, and the total amount you can collect will be capped at your total death benefit for your policy. Provisions vary from insurance company to insurance company… see your policy for details and know what you’re buying before you buy anything!)

Return of Premium Rider

Return of Premium Term Life insurance (ROP) is a feature that offers a guaranteed 100% return of your premiums at the end of the term period, assuming the insured person is still living. A 40 – year old Male in excellent health buying a 30 – year $1 Million ROP policy will cost about $84,000 over the 30 – year term, and at the end of the term you will get all $84,000 back. This option tends to approximately double the up-front cost an ordinary 30-year level term policy.

Term Conversion Rider

A Term Conversion rider gives you the option of converting your Term Life insurance (temporary) policy to a permanent policy like Whole life or Universal life . This is also known as a convertibility option. This option guarantees you the right to convert to a permanent policy without the need for a medical exam or health questions. This is a valuable option to have when you are younger and in good health, and perhaps can’t afford a Whole Life or Universal Life policy, but gives you the option to convert at a later date. This option can save you money on a permanent policy, if your health has deteriorated from when you originally purchased your Term policy. Most policies have specific conversion requirements outlined in the documentation.

Waiver of Premium Rider

See Disability Waiver above.

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