What is a life insurance rider?

When you build the perfect life insurance policy, you may need to select special policy riders that extend coverage or provide you with additional benefits. The standard policy will provide you with a death benefit for a period of time or for your lifetime, but sometimes policyholders would prefer to buy into a plan that offers familial protection or a living benefit as well. Start comparing life insurance rates now by using our FREE tool above! When the standard policy does not offer an applicant all that they are looking for, policy add-ons are recommended. Read on, and learn more about what life insurance riders are and what types of riders you can select for both term and permanent insurance products.

What is the purpose of life insurance policy riders?

A basic policy provides the beneficiaries with a death benefit. Some permanent policies may have additional living benefits built into the policy in the form of cash withdrawals or loans. When you buy a life insurance policy and then select a rider, you are adding on new provisions that provide additional benefits that are separate from the benefits provided by the standard product.

The entire purpose of a rider is to make it so that the person buying insurance is better able to buy a custom policy that meets their unique needs. A standard policy can be customized, but not to the level of customization that you can reach when you research and select the best riders. This is why any person who is on a mission to buy life insurance needs to be aware of what is available before they submit an application for coverage.

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What are the most common types of riders that you can add onto a standard plan?

There is a long list of riders that you can select from when you are building a custom life policy. Some of these riders will extend coverage to other family members and others will increase the face value of your plan without needing to medically qualify. Before you decide that you are going to reject any add-on that will cost you money, you should consider how paying a few extra dollars each month could make a major difference later in life. It is about weighing the costs and the security that added riders will offer you. Here is a breakdown of the types of riders that turn a basic life policy into a product that offers protection now and when you are gone.

Riders For Policyholders Who Suffer a Disability or Illness

Life insurance is designed to provide financial protection to listed beneficiaries when the named insured passes away. While the financial protection is enough for some, others need supplementary benefits that will expand coverage for a very small premium and very little additional underwriting.

Supplementary benefits that make paying for coverage or buying additional coverage following a disability can be beneficial to many.

You really need to consider how you would pay your premiums if you were living off of state disability or if you had no income at all coming in. The last thing that you want to do is let go of your insurance just because you have other more important living expenses and you cannot afford to keep it active. Here are some of the riders that will protect you if you experience this less than ideal scenario:

• Waiver of Premium Rider

If you become ill or fully disabled, the waiver of premium rider will waive your premium payments until you are no longer ill or disabled. While your waiver of premium rider is paying your premiums, the life policy will stay active so that the beneficiaries will receive their proceeds if the insured party dies.

You can choose to add this rider to either a permanent life or term life plan if you qualify. In order to be eligible, most companies have age restrictions and disability requirements. If you are over the a certain age or the disability is expected to last less than 6 months to a year, you will not be eligible for the waiver.

• Accelerated Death Benefit Rider

Some policies can offer living benefits to their policyholders if the policyholder has been diagnosed with a terminal illness and they have elected to carry the accelerated death benefit rider. By accelerating benefits, the policy will pay the insured when a qualifying event happens. The qualifying event may be a diagnosis of a terminal illness, an acute illness or permanent confinement in a nursing home. Whatever living benefits that are paid out will reduce the death benefit that beneficiaries receive.

• Long-term Care Rider

A disability can turn your life upside down. If you become ill or you are injured to the point that you cannot live on your own without home care, you will need long-term care. Some cannot afford long-term care insurance. For these people, electing a long-term care rider is a good alternative. A long-term care rider will provide the named insured with monthly payments to cover a portion of the care costs. It may not pay for the entire cost or care, but it will certainly help and could save your home and other assets. The only way to add this rider is if you are not over a certain age.

Riders to Increase Your Death Benefit or Renew Your Policy

When you apply for life insurance, most insurers require you to prove that you are in good health by taking a medical exam. If you do not have serious conditions that could shorten your life expectancy, you will receive a standard or preferred risk rating and your policy will be issued. Unfortunately, after a policy is issued not everyone has a great prognosis. Some individuals will fall ill or discover that they have a disease or chronic illness that would disqualify them from buying additional coverage. This is when a rider to increase your death benefit or renew would come in handy.

• Guaranteed Renewal Rider

A guaranteed renewal rider, which may also be called a renewal provision, will guarantee that your policy is renewable at the end of the term. If you buy term insurance, the insurance is only going to stay valid for the length of the term that you select. After this time, the policy will just expire.

When you have a renewal provision that guarantees the policy is renewable, you will not be required to prove that you are insurable when the term ends.

You will be charged premiums based on your new age but will not be penalized if you have a medical condition. This can help ensure that you are insured through your retirement when you can only afford to buy term life. This type of policy can also be converted into a permanent plan in the early years of the policy if the company allows.

• Guaranteed Insurability Rider

If you have a permanent plan, the guaranteed insurability rider will ensure that you can raise your death benefit even if you do not qualify for coverage at the time. The rider itself lets policyholders buy additional coverage without having to go through a medical underwriting process. You will be able to increase your limits only at specific anniversaries and may only choose an increase that can be limited by the insurer. After you reach retirement age, you can no longer select increases.

Riders That Extend Coverage to Others

Your spouse or your children do not always need their own separate plan. If you cannot afford to buy a separate plan for your stay-at-home partner, or you want children’s coverage to establish coverage while they are young, you can select different riders that extend coverage. Here are the riders to remember:

• Child Term Rider

No one wants to picture using life insurance for their child, but there can be real benefits to buying insurance young. If you add a child term rider to your policy, you will have term coverage for your minors until they reach adult age. At that time, the rider can be converted to a permanent plan without any type of medical requirement.

• Spouse Rider

The spouse rider can also be beneficial when you have a spouse that does not qualify for coverage or when you cannot afford a separate plan. You are limited in how much coverage that you can purchase, but the coverage will stay active for as long as the master policy is active. The spouse coverage can be converted if the insured spouse passes away.

There are dozens of useful life insurance riders that can really turn your life policy into a lifesaver. You need to review the options offered by your insurer and when you must apply for the rider before you submit your application. If you find one that you feel you must have, price the cost of the rider and weigh this cost versus the benefits so that you can justify the addition. Start comparing life insurance rates now by entering your zip code in our FREE tool below!

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