What is a life insurance rider?

What is a rider on a life insurance policy?

An insurance rider is an attachment to an insurance policy that alters the policy’s coverage or terms. It may add coverage options to the policy.

Types of life insurance riders

We can better understand how riders work by taking a brief look at some of the more popular riders. Some riders are free, while others may come at a cost.

Accelerated death benefit or living benefits

This rider could pay some of your plan’s death benefit while you’re still alive but dealing with a terminal illness that demands treatment or care. For example, if you developed Alzheimer’s Disease, you might want to request some of your death benefit to cover the costs of your later-stage care. The payout will differ from case to case but could reach as much as 80% of the death benefit.

Accidental death and dismemberment (AD&D)

Do you have a dangerous job? Are there other parts of your life—hobbies, sports, etc.—that put you at higher-than-average risk for significant injury or death? This rider to your existing life insurance policy may pay an extra death benefit if you die from a covered accident. An AD&D rider may also pay a benefit if you lose specific limbs or suffer blindness as a result of an accident.

Critical illness

It could pay some of your plan’s death benefit if you’re suffering from a severe health issue specifically covered by the rider. Typical conditions include cancer, heart attack, and stroke. The timing for the payment of the benefit can vary from one insurance provider to another. Some companies pay after they confirm the diagnosis, while others may have different requirements.

Chronic illness

This rider could pay some of your plan’s death benefit if you’re dealing with a covered chronic illness. As in the case of a critical illness rider, the timing for the payment of the benefit can vary from one insurance provider to another. Some companies pay after they confirm the diagnosis, while others may have different requirements. A rider like this could be extremely helpful if someone diagnosed with Multiple Sclerosis (MS) needs help with daily needs like bathing and dressing.

Long-term care

Following an illness or accident, many people require care for years. Typically, this rider will keep paying for your long-term care even if the cost of your care becomes more than the amount of your plan’s death benefit. So, if you have an insurance plan for $30,000 but your long-term care costs $40,000, you might not have to worry about trying to find money to pay the additional $10,000.

Spousal

This is a way to add your husband or wife to your insurance plan. If your spouse dies before you do, you may receive a payout.

Child

A child insurance rider lets you add your children to your plan. Typically, the children must be from two weeks old to 17 years old, though some insurers will permit children as old as 24.

Guaranteed insurability

You might consider purchasing this rider if you expect that your health will make it harder for you to get a new insurance policy a few years from now. For example, suppose there’s a particular illness that runs in your family, and there’s a strong chance that you could develop the disease in the future. In some cases, this rider type will allow you to renew your policy even if your health changes. In other cases, you may be able to increase the amount of your coverage without health questions or tests.

Waiver of premium

With this rider, you may be able to keep your coverage even if a severe disability prevents you from making your monthly payments.

Return of premium

If you have term life insurance and live past the term limit, you won’t collect the death benefit, but you may be able to receive a refund of the premiums you paid on the policy.

Does the kind of life insurance I have affect the riders I can get?

You may be able to add riders to either a term life insurance plan or a whole life plan. However, some riders only work with one type of life insurance. For example, there’s the term conversion rider. It allows you to change your life insurance plan from term life to whole life before the end of the term.

Should you consider adding insurance riders?

Riders may give you the chance to customize your insurance to better fit your needs. But not all riders are appropriate for everyone. You may only need one or two riders—or none at all. Also, remember that you may have to pay a higher premium if you add riders. And make sure you understand if and how the rider affects the amount of money your loved ones get if you die. Carefully consider your situation and choose only the riders that will benefit you and your family.