Essential Life Insurance Riders You Should Know About

Video Transcript

Today, we are focusing on those extra features you can add to your policy known as riders. Riders can enhance your insurance, providing added protection and benefits. Let's explore what these are and how they might be useful for you.

Think of them like customizing your car with all the optional upgrades that suit your lifestyle and needs. Whether you're a new policyholder or thinking about updating your existing coverage, understanding riders can help you make the most of your life insurance. So, buckle up, and let's dive into the specifics of common life insurance riders.

Simply put, a rider is an optional benefit you can add to a life insurance policy to provide additional coverage or features. Think of it as a mini contract that tailors your insurance to better fit your personal circumstances. Riders can address a wide range of needs, from covering your children by accelerating your death benefit if you become critically ill.

Let's go over some of the most common riders you might consider. Waiver of Premium Rider: This rider waives your policy's premium payments if you become totally disabled and can't work ensuring your life insurance stays in force without burdening your finances during a tough time. Accelerated Death Benefit Rider: If you're diagnosed with a terminal illness, this rider allows you to access part of your death benefit early. It can be a financial lifesaver for covering medical bills or ensuring quality of life. Guaranteed Insurability Rider: This rider lets you increase your coverage amount at future dates or life events, like marriage or the birth of a child, without undergoing further medical exams. It's a great way to ensure your coverage grows with your life. Child Term Rider: This rider provides temporary life insurance coverage for your children under your policy, a cost-effective way to protect your family, all under one policy. Lastly, Return of Premium Rider: If you outlive your term life insurance policy, this rider can refund all or some of the premiums you paid.

Now you might wonder, Do I really need any of these riders? It depends on your personal and financial situation. Consider factors like your health, family history, financial goals, and whether you have other financial safeguards in place. A financial advisor can help you assess your needs to see if riders make sense for you.

Adding riders to your policy is generally straightforward. You can usually choose them at the time you purchase your policy, but some can be added later. Keep in mind, adding riders will increase your premium, so it's important to balance the extra cost with the potential benefits.

Thanks for joining us as we navigated through the world of life insurance riders! Just like choosing the right accessories for a car, selecting the right riders can enhance your life insurance policy and provide additional peace of mind.

What Are Life Insurance Riders?

A valuable option for policyholders who want to tailor their coverage to their specific needs and circumstances is Life Insurance Riders. Riders are additional provisions or options that can be added to a life insurance policy to customize it. These riders provide additional benefits and protections, which can help safeguard your family in the event of unexpected life events. Riders can be added to whole life, universal life, and term life policies.

It's important to note that life insurance policy riders are optional and typically come at a modest additional cost to your life insurance premiums. However, since most riders must be purchased when you take out your life insurance policy, it's important to know your options before applying for coverage.

Life insurance policies have evolved to offer more than just a death benefit payout. Many life insurance companies offer riders provide living benefits, which provide financial benefits to the policyholder and their families while they are still alive. Life insurance with living benefits serves to enhance financial security and flexibility, making life insurance a versatile tool for financial planning in addition to after-death support for beneficiaries.

Remember that there are various types of life insurance policies and optional life insurance riders that may suit your needs and financial situation. It is important to take the time to thoroughly research buying life insurance and consider all available options, taking into account your financial objectives, family, and personal preferences.

Do I Need Riders on My Life Insurance Policy?

The simple answer: No. While some riders may come standard on your life insurance policy, others provide supplemental coverage that's completely optional. The idea behind riders is to allow you to tailor coverage around your unique financial needs.

Before applying for coverage, it's a good idea to ask your insurance representative which riders are available. You may find that you're comfortable with the features of the policy as it is.

How Much Do Life Insurance Riders Cost?

The cost of policy riders in life insurance depends on many factors, including the benefits they provide and the size of your base policy. Factors unique to you, including your age, gender, health, and whether you engage in any high-risk activities, may also affect pricing.

While some riders add relatively little to your premium, pricing can vary considerably. If you're considering supplemental coverage, ask your financial professional to provide pricing for your specific policy. Shopping around is also key. You may find that an insurer has a cheaper base policy but has a higher total cost when factoring in the riders you've selected.

Can I Add a Life Insurance Rider After the Policy Has Been Purchased?

Most riders have to be purchased when you take out your life insurance policy, which prevents insurers from assuming an undo level of financial risk. However, depending on the type of rider, the specific policy, and the life insurance company, it is often possible to add a rider later on after the policy has already been issued.

Remember that adding a life insurance rider later on might be more complicated or costly than including it at the time of initial purchase. Some riders might not be available for addition later, and adding a rider later in life may lead to higher premiums due to increased age or changes in health.

Here are common life insurance riders to understand when looking to maximize your benefits.

Accelerated Death Benefit Riders¹

When facing a serious or terminal illness, having an added layer of financial protection can help provide peace of mind for you and your loved ones. The accelerated death benefit rider, also known as a Terminal Illness Rider, permits the policyholder to receive a portion of the death benefit while they are still alive, but only under certain circumstances. The received funds can be utilized for any purpose, although they are commonly used to cover medical expenses, long-term care services, or to enhance the quality of life for the policyholder.

The accelerated death benefit amount varies based on the policy's terms, but it is generally a meaningful portion of the death benefit. It's important to note that the amount received will be subtracted from the death benefit when the policyholder dies, reducing the amount that beneficiaries receive.

Accidental Death Benefit Riders

An accidental death benefit rider (also known as accidental death rider) provides an additional payment, over and above the basic death benefit, if the insured dies due to an accident. This means that if the insured's death is the result of an accident (as defined in the policy), the beneficiaries would receive the policy's standard death benefit and the additional amount from the accidental death benefit rider.

This additional benefit is often equal to the face value of the original policy, effectively doubling the payout, but the exact amount can vary based on the policy's terms.

Child Term Riders

The loss of a son or daughter is always tragic. The last thing you want is for financial hardship to accompany that loss. A child term rider (also known as child protection rider) is an optional add-on to a life insurance policy that provides coverage for the policyholder's children.

One of the key benefits of this rider is that it can help cover the unexpected costs associated with a child's death, such as funeral and burial expenses.

This rider often includes a conversion privilege, which allows the child to convert the rider into a permanent life insurance policy (up to a certain limit) when they reach adulthood without having to provide proof of insurability.

Chronic Illness Riders

Chronic illnesses can come out of nowhere, resulting in significant medical expenses and care costs. Adding an optional chronic illness rider to your life insurance policy provides a living benefit, allowing you to access a portion of the death benefit while still alive when the insured becomes chronically ill and meets the rider's criteria.

Ensuring there are funds available in case you ever experience a chronic health condition, can help provide a peace of mind for both you and your loved ones.

Cost of Living Adjustment Riders

A cost of living adjustment (COLA) rider is an optional add-on to a life insurance policy that helps to protect the policy's benefits from being eroded by inflation. The main purpose of a COLA Rider is to ensure that the death benefit keeps pace with cost of living increases. Without this rider, the value of a life insurance policy's death benefit could be significantly reduced over time due to inflation.

Critical Illness Riders

A prolonged health ailment may threaten your financial security. Help safeguard against that possibility by adding a critical illness rider to your policy. This rider provides a lump sum benefit if the policyholder is diagnosed with one of the specific critical illnesses covered by the policy. It's important to note, however, that once the critical illness benefit is paid, it may reduce the remaining death benefit.

Disability Income Riders

Disability can strike anyone at any time. If you become disabled, you could lose your income and your ability to provide for your family. A disability income rider (also known as a disability income benefit rider) can help you protect your income and your financial future.

The disability income rider is a provision that can be added to a life insurance policy as an option. It offers a monthly income benefit in the event you become disabled and are unable to work. The benefit is typically a percentage of the policy's face amount, and it is paid until the insured person reaches retirement age or dies, whichever comes first.

Family Income Riders

Families with young children or others who rely heavily on the policyholder's income may find it challenging to manage a lump sum life insurance death benefit payout. A family income rider (as known as a family income benefit rider) helps with this by providing a monthly income to the beneficiaries upon the death of the policyholder, in addition to or instead of a lump sum death benefit.

The duration of this period is typically set at the time the policy is purchased and could extend until the policyholder would have reached retirement age, depending on the specific terms of the rider. Having a steady income stream can provide a more manageable way to handle the insurance proceeds and can help ensure the family maintains their standard of living over a longer period.

Guaranteed Insurability Riders

Life is unpredictable. There's a good chance your family's needs may change over time. If you need to buy additional protection, you typically have to go through medical underwriting first. That's not the case if you have a guaranteed insurability rider.

A guaranteed insurability rider (also known as a guaranteed purchase option) is an add-on to a life insurance policy that allows the policyholder to purchase additional insurance coverage at predetermined intervals without having to take a medical exam or provide proof of insurability. In other words, you won't have to undergo further medical examinations or answer health-related questions to secure more coverage.

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Joint Life Policy Riders

Couples often need help finding an affordable and comprehensive life insurance solution that covers both partners, which leads to purchasing separate policies. This issue can be resolved by getting a joint life policy rider, an add-on to a life insurance policy that allows both individuals to be covered under one policy, making it easier to manage and potentially lowering costs.

When a joint life insurance policy covers two people, a single payment will typically be made in the event that one of them dies. There are two types of policies to choose from: first-to-die policies, which pay out when the first person covered passes away, and survivorship or second-to-die Rider policies, which only provide a payout when both policyholders have passed away.

Long-Term Care Riders

If you become unable to perform certain activities of daily living due to a chronic illness, disability, or cognitive impairment, a long-term care rider can provide valuable financial assistance for individuals who need long-term care services. The rider allows a portion of the death benefit to be paid out early to cover the costs of long-term care services, which can include home care, assisted living, adult day care, respite care, hospice care, nursing home, Alzheimer's facilities, and home modification to accommodate disabilities.

It's worth noting that the amount used to cover long-term care costs will reduce the overall death benefit that will be available to the policyholder's beneficiaries upon death. Additionally, there may be waiting periods and certain limitations attached to this rider.

Paid-Up Additions Riders

A Paid-Up Addition Rider on a whole life insurance policy allows policyholders to systematically use dividends to buy extra, small portions of fully paid life insurance called paid-up additions (PUAs).

PUAs enhance whole life insurance policies by increasing cash value and death benefits, offering tax-deferred growth, and allowing for premium flexibility. These additions compound over time, bolstering the policyholder's immediate and long-term financial security without requiring additional out-of-pocket expenses.

Return of Premium Riders

Generally, the insured individual doesn't expect to get any money back if they outlive their policy. A return of premium rider is an optional provision you can add to your term life insurance policy that returns base policy premiums paid to the policyholder if they outlive their policy term.

This rider is a financial safety net that helps protect your money. It acts as a form of savings, ensuring you'll either receive a death benefit payout or receive your premiums back if you outlive your term.

Term Conversion Riders

As you get older, your health condition may change, affecting the type and cost of the permanent life insurance policies that you can be eligible to buy. A term conversion rider is a provision within a term life insurance policy that allows the policyholder to convert their term life insurance into a permanent life insurance policy without having to undergo a medical examination or provide proof of insurability.

The option to convert typically has a deadline, often by a certain age or a specific number of years into the policy term. The terms and conditions for conversion, including the deadline, will be detailed in the insurance contract. It's important to note, however, that converting to a permanent policy will generally result in higher premium payments.

Term Insurance Riders

Tailoring your life insurance based on your unique situation ensures you have the proper financial protection for yourself and your family if something unexpected happens. One option for customization is the term insurance rider.

This life insurance rider add-on is a valuable feature that improves coverage for specific time periods, allowing you to customize your policy to match life's changing circumstances.

Term insurance riders are often less expensive than purchasing a term life policy and then taking out a separate permanent policy later on.

Waiver of Premium Riders

When you experience an injury or illness that results in a temporary loss of income, the prospect of forfeiting your life insurance coverage can be stressful. A waiver of premium rider is designed to provide financial protection in the event that the policyholder becomes seriously ill or disabled and can no longer afford to pay the insurance premiums. The insurance company will either cover the premiums or waive them.

This means that your policy will not lapse due to non-payment, and your beneficiaries will still receive the death benefit if you pass away. Once your condition improves and you're no longer disabled, you then have to resume your monthly payments.

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