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Life Insurance Riders: Which Are Right for You?

Updated
Dana George
Robin Hartill, CFP
By: Dana George and Robin Hartill, CFP

Our Insurance Experts

Eric McWhinnie
Check IconFact Checked Eric McWhinnie
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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?

A life insurance rider is an add-on that allows you to customize your insurance coverage in a way that makes the most sense for you and the people you care about. For example, you may have a child and want to add a child rider to your life insurance. Or 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 10 of the most common life insurance riders requested.

1. Accelerated death benefit rider

If you are diagnosed with a terminal illness and have a life expectancy of 12 months or fewer, an accelerated death benefit rider gives you a one-time lump-sum payment from what would be your life insurance proceeds. Sometimes an accelerated death benefit rider is referred to as a terminal illness rider. 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.

An accelerated death benefit rider is a type of living benefit rider, which is any type of rider that lets you access some or all of your death benefit while you're still alive. Other types of living benefit riders include a critical illness rider, which kicks in if you have a serious (but not necessarily terminal) illness and a disability rider,

2. Accidental death rider

If you travel extensively or work in a dangerous job, an accidental death rider may be right for 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.

3. Child rider

A child rider provides a small death benefit that can help cover funeral expenses and medical costs in the tragic event that you lose your child. Typically, this rider ends when the child is between ages 18 and 25. 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.

4. Cost-of-living rider

A cost-of-living rider gradually increases your policy's death benefit to keep up with inflation. Your premiums will also increase as living costs go up.

5. 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.

Typically, a guaranteed insurability 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.

Many policies have an age limit, often around 40, though. After that point, many policies will require a new life insurance medical exam and underwriting

Typically, a guaranteed insurability 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.

6. Long-term care rider

It's no secret that long-term care is expensive. If you're concerned about how you'd pay for assisted living or a nursing home if you need skilled 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.

7. Return of premium rider

Some life insurance companies allow you to purchase a return of premium rider, which will return some or all of your premiums if you're still alive when your term life insurance policy ends.

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

This is one of the most expensive life insurance riders out there, often costing anywhere from two to five times what you'd pay for a basic term life policy. If you cancel your policy before the end of the term -- as many policyholders do -- you won't get a refund for any of your premiums.

8. Spousal rider

A spousal rider provides a limited death benefit if your spouse dies. It's similar to a child rider in that the death benefit usually won't cover much more than a funeral and other final expenses. A spousal rider isn't a substitute for a life insurance policy because the death benefit is minimal. Ideally, each spouse should have their own life insurance.

9. Term rider

A term rider allows you to layer additional term coverage onto a permanent life insurance policy (most commonly, whole life insurance). Let's say you have a permanent policy and you're 30 years old but want additional coverage until you retire at age 55. By purchasing a 25-year term rider, your beneficiaries would get a larger death benefit if you died before you're 55. This option is popular among parents who want more coverage until their children reach adulthood or finish college.

10. 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.

A typical policy has a six-month waiting period before this rider takes effect, though if your claim is approved, many insurers will refund the premiums you paid during this period. This rider often expires around age 60 or 65.

Are life insurance riders worth it?

Some riders, like an accelerated death benefit, are frequently included at no cost as part of a standard policy. Others can substantially drive up the costs of premiums. Because life insurance needs are complex, discuss any riders you're considering with a financial advisor.

Adding or removing insurance riders

It's typically recommended that you decide what riders you want when you're buying life insurance. Some riders can only be added when you purchase a policy. Adding a rider may require new underwriting, including a new medical exam. 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 the coverage you're buying is what you want and need.

Removing an insurance rider is pretty simple, though. It's as easy as contacting your insurance company and completing a bit of paperwork.

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 the type of rider and insurance carrier. Some riders are frequently included at no additional cost. Others, like a child rider, may be available for as little as $4 or $5 a month. But some life insurance riders, like a return of premium rider, could cost up to five times the amount of base premiums.

  • As terrible as it is to think about losing a child, a child rider is worth considering if you think you'd struggle to pay for their final expenses should the worst occur. A child rider will often cost about $50 extra annually for $10,000 of coverage. One benefit of 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 term coverage to a permanent life insurance policy.

  • The biggest disadvantage of life insurance riders is that the extra protection typically comes at a cost. Some riders could cause you to feel like you have more financial protection than you actually have. For example, a spousal rider isn't sufficient to provide income replacement if your spouse dies.

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