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Life Insurance Riders: Which Are Right for You?

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Whether you're the primary breadwinner in your family or not, one of the kindest things you can do for your loved ones is to purchase life insurance. A licensed insurance agent can help you determine how much life insurance you need. Once you've found a policy with sufficient coverage at a price you can afford, it's time to take a closer look at life insurance riders.

What is a life insurance rider?

Life insurance riders allow you to customize your insurance coverage in a way that makes the most sense for you and the people you care about. These riders are typically add-ons that make it possible to choose additional features to fit your needs. For example, you may have a child and want to add a child rider to your life insurance. You may worry that you're throwing your money away on monthly insurance premiums and want a return of premium rider. Some riders come free with a policy and others are available at an additional cost.

Here are some of the most common life insurance riders requested:

Guaranteed insurability rider

A guaranteed insurability (GI) rider makes it possible to purchase additional insurance coverage at specific dates in the future. In other words, you purchase a policy now with the knowledge that if you want to buy more life insurance in the future you can do so without a life insurance medical exam that proves eligibility.

Let's say you're healthy now but develop heart disease in the coming years. By adding the GI rider to your policy, it doesn't matter what the state of your health is when you decide to purchase more coverage. The rider automatically qualifies you.

Typically, a GI rider gives you the option of purchasing additional coverage every three to five years. Some policies also allow you to exercise the option as you experience certain life events, like getting married, giving birth, or adopting a child.

Waiver of premium rider

If you become disabled due to an illness or injury that causes you to leave the workforce, a waiver of premium rider keeps your life insurance in force, even though you're not paying premiums. Once you're able to work again, you'll be responsible for resuming payments to keep the policy in force.

Return of premium rider

Some life insurance companies offer policies with a built-in return of premium riders. Others require that you purchase this coverage separately. As the name of the rider implies, a return of premium rider returns premiums paid to the policyholder when the term policy comes to an end.

Let's say that you purchased a 30-year term policy at age 25, and now that you're 55 the policy has come to an end. All premiums paid within those 30 years will be refunded to you.

Accelerated death benefit rider

If you are diagnosed with a terminal illness and have a life expectancy of 12 months or less, an accelerated death benefit rider gives you a one-time lump-sum payment from what would be your life insurance proceeds. You can use it to pay for treatments, cover the cost of a housecleaner, take your family on a vacation, or use it in any way that makes your life easier. Any life insurance money left over will go to your beneficiaries upon your death.

Accidental death rider

When it comes to the question of how to buy life insurance, the best answer may be: by predicting the worst. If the worst were to happen, what's the best way to continue caring for your beneficiaries? If you travel extensively or work in a dangerous job, an accidental death rider may be the best way to make sure they have what they need if anything happens to you.

An accidental death benefit rider provides an additional payment to your beneficiaries if you die due to an accident. The amount paid is often twice as much as your original policy.

Long-term care rider

It's no secret that long-term care is expensive. If you're concerned about how you will pay for assisted living or a nursing home if the day ever comes when you need additional care, a long-term care rider helps cover those fees by using money from your policy's death benefit. Again, anything left over would go to your beneficiaries.

Each state and territory has its own long-term care regulations, so be sure to check the state in which you live.

Child rider

Life insurance for children is a delicate subject because no one wants to imagine the death of their child. Still, depending on the amount of the child rider, these funds can help cover funeral expenses and medical costs. The nice thing about child rider life insurance is that it can typically be converted to a permanent insurance policy without the need for a medical exam.

Family term rider

A family term rider treats your family as a unified entity. In essence, it's like bundling life insurance for spouses with a child term rider. Depending on the insurance company, you may be able to convert the family term rider to permanent cash value insurance.

Living benefit rider

A living benefit rider is designed to make your life easier and to keep you healthy for as long as possible. For example, Haven Life offers a living benefit rider that provides a fitness app, 15% discount for health services at MinuteClinic, access to a free program that allows you to draft a will, an online "safe deposit box" that offers a secure space to store and manage your family's important documents, and other benefits.

Term rider

A term rider allows you to add additional years onto a permanent life insurance policy (most commonly, whole life insurance). Let's say you have a permanent policy for 30 years but want coverage until you retire. By purchasing a 25-year term rider, you'll have 55 years of increased coverage. A term rider represents a less expensive way to add additional death benefits. The only caveat is that the term rider must be shorter than the permanent life policy. For example, you could not add a 30-year rider to a 20-year policy, but you could add a 20-year rider to a 30-year policy.

Terminal illness rider

A terminal illness rider is the same thing as an accelerated death rider. Each allows you to draw funds from your life insurance proceeds to use in the 12 months prior to when you're expected to pass away. This rider is normally added to life insurance free of charge.

Additional insured rider

An additional insured rider (AIR) covers an additional person on your life insurance policy. The amount of their minimum death benefit cannot exceed the face amount of your policy. Let's say you get married and want to add your new spouse. Their death benefit cannot be more than yours. Not all insurance companies offer AIRs so it may take some shopping around to find an insurer that does.

Change of insured rider

A change of insured rider allows the policyholder to change the insured person on the policy while it's in force. A change of insured rider is usually used by businesses that want to make sure their key employees are covered. When one key employee leaves the company, they change the insured person to another.

Are life insurance riders worth it?

Some riders are included at no charge to you. Naturally, they are always worth it. That said, if paying extra for a rider allows you to sleep easier at night knowing that you have the coverage you desire, it's absolutely worth it.

Adding or removing insurance riders

Adding or removing an insurance rider is as easy as contacting your insurance company and letting them know what you want to do. Depending on how long it's been since you purchased your original policy, you may be required to undergo a medical exam to add certain types of coverage. In addition, the older you are, the more expensive the rider in question may be. It's important to learn more about costs and to read policy documentation from the insurance company to make sure that the coverage you're buying is what you want and need.

Life insurance may not be the most enjoyable purchase you ever make, but choosing the right coverage may allow you to rest easier. After all, there's nothing like knowing that you've done all you can to protect the people you love.

FAQs

  • The cost of life insurance riders varies by type and by insurance carrier. Some riders start as low as $2 to $3 per month.

  • As terrible as it is to think about losing a child, having a rider in place means having money to bury a child if they die. The great thing about a child rider is that most can be converted into permanent policy later in the child's life, without that child being required to show evidence of insurability.

  • A 20-year term rider would add 20 years of coverage to an existing policy. The only caveat is that the policy it is added to must have a longer term.

  • Among the most common life insurance riders are accelerated death benefit, critical illness, disability, waiver of premium, cost of living adjustment (COLA), accidental death, guaranteed insurability, child term rider, return of premium (ROP), long-term care (LTC), and term conversion.

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