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An insurance rider is an addition to an insurance policy that adds further benefits to which you would not otherwise have access. Life insurance policy riders provide supplemental coverage not typically offered by a basic insurance policy, allowing you to customize your insurance plan to meet the diverse needs of yourself and your family.
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Life insurance riders are amendments that change the terms or conditions of an insurance policy. When a policyholder meets the specific requirements of an active rider, they can submit a claim to their insurance company to access the benefits provided by the rider. These riders can be included by default by many insurers, or they can be selected and added to a policy while purchasing life insurance.
However, the variety of riders varies among insurance companies, and some riders may only be offered with particular types of life insurance policies.
Because riders offer extra coverage or features, they are generally purchased at additional cost. Some riders do not trigger a cost until they are activated in the case of a specified event. The cost of most life insurance riders is relatively low.
In short, life insurance riders are beneficial for multiple reasons:
It’s also worth noting that Paid-Up Additions (PUA) riders can help you build cash value in a whole life insurance policy more efficiently. You can think of this rider as a “micro-policy” added on to the base plan. It is one of the best options for augmenting a life insurance plan.
There are various life insurance riders that can be added to a policy to protect against unforeseen circumstances. Some of the most common are listed below:
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Also known as “living benefits,” accelerated death benefit riders allow you to access some portion of your policy’s death benefit (prior to death) should you be diagnosed with a terminal illness. Because the cost of associated medical care can be so devastatingly high, accelerated death benefit riders can be extremely helpful in mitigating the subsequent financial burden.
This particular life insurance rider is often added at no additional cost to your premium, but there typically is a charge when the rider is activated in the event of terminal illness.
Most life insurance policies typically cover deaths resulting from accidents. However, the accidental death rider adds extra amounts to your death benefit should you die as the result of an accident. Sometimes called a “double indemnity” rider, the accidental death rider pays double the traditional benefit in the case of accidental death. An accidental death and dismemberment (AD&D) rider may additionally cover the loss of a limb or body part, loss of speech, eyesight, or hearing.
Accidental death riders are usually added at an extra cost to new or existing life insurance policies. Terms may vary according to an insurance provider’s definition of what constitutes an “accident”. An accidental death rider usually does not cover cases of suicide, illness, or death due to illegal activities.
This rider incrementally enhances the coverage of your policy over time, ensuring that the policy’s value remains unaffected by inflation. As a result, both the coverage amount and the premium will rise concurrently.
Adding a guaranteed insurability rider allows you to increase future life insurance coverage without the need for further medical examination, questionnaires, or re-qualification through underwriting. Guaranteed insurability riders define certain time windows & amounts in which coverage additions can be made, giving you the option of increasing your death benefit within specific predetermined boundaries. This means that even as you age or face new health issues, the cost of increasing your insurance coverage will still be based on your original life insurance health rating.
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Adding a guaranteed insurability rider is done at the time the policy is created and will raise the cost of your premium as long as the rider remains in effect on the policy.
Your ability to regularly pay the premium on your insurance policy can be compromised by illness or serious injury that threatens your ability to work. With a waiver of premium rider, however, your life insurance premiums (or at least a portion of them) can be waived and made exempt if you become disabled or unable to earn your normal income. In such instances, being free from the obligation of paying the policy’s premiums can be a huge financial relief.
Qualifying for a waiver of a premium rider might require that you meet certain age or health criteria. In addition, the waiver of premium rider is not available for pre-existing conditions if you are already disabled.
Instead of purchasing separate life insurance policies for your children, a child rider can be added to your life insurance policy to provide them limited coverage. The associated death benefit is small compared to a full life insurance policy, usually in the neighborhood of $10,000-25,000. This rider takes effect if the child dies before reaching the “age of maturity,” which can range in definition from 22 to 26 years old, depending on the provider and the terms of the policy. Upon reaching the age of maturity, the rider can often be converted into a full insurance policy for the child, adding more comprehensive benefits and coverage.
Child riders can be added to your life insurance policy with no need for medical examination. There typically will be a few questions related to each child’s general health & well-being. This rider can be added for biological children, stepchildren, and legally adopted children, typically resulting in only a small increase to your insurance premium.
Adding an insurance rider to your insurance policy gives further benefits to which you would not otherwise have access. However, deciding whether to add a rider to your life insurance policy can depend on the specific rider and your individual policy needs. For instance, if you anticipate requiring additional financial assistance in case of a future serious health condition, opting for a health-related rider could be very beneficial. This type of rider allows for early access to a portion of your death benefit under certain conditions.
Additionally, be aware that incorporating a rider can lead to an increase in your insurance premium. To gauge the impact, compare the cost of your policy with and without the desired rider to see the difference in pricing.
The cost of adding any life insurance rider to your policy will vary, corresponding directly to the amount of coverage or benefits it provides. The type of rider and the type of risk involved are both factors to consider, but most insurance riders are relatively inexpensive. It may be worth your time to schedule a strategy session with one of our insurance specialists to consider your options.
There are a number of different types of riders that can be added to a life insurance policy. Adding a rider to your policy can help you customize the coverage and add benefits to meet your specific needs and those of your family. When considering whether or not a life insurance rider meets your needs, make sure to review our Life Insurance 101 guide to gather additional information, or reach out to an insurance specialist to begin strategizing today.
by John T. McFie
I am a licensed life insurance agent, and co-host of the Wealth Talks podcast.
At age 14 I started developing spreadsheet models and software systems to help my Dad share financial concepts with clients.
Skipped college at 17 recognizing the overinflated value and prices of most college degrees and built more financial software instead (see MoneyTools.net). Still a strong advocate of higher education without going to college. I enjoy making financial strategies clear and working through the numbers to prove results you can count upon.
