Life Insurance Riders: More than Just a Death Benefit Policy
If you’ve read our previous life insurance articles, you already have a better understanding of life insurance than the average person. In general life insurance solves the concern of family protection after death, however insurance carriers can provide additional provisions to your policy through riders at an additional cost to the insured. This article will go over some common riders that you may see as you shop for a policy.
A good illustration to explain the concept of riders is the experience of purchasing a new car. When closing the transaction, the car dealer will ask if you’d like to add-on any accessories or enhancements at an additional cost, such as better audio, tinted windows, leather seats, navigation system installation, and more.
Like a car, a life insurance policy can be enhanced with riders. Knowing what riders are available can help you determine and narrow down which insurance carriers and products would suit your needs better. Depending on the insurance carrier and type of product, the riders discussed below may or may not be available.
- Accelerated Death Benefit rider: This rider allows the insured to accelerate their death benefit for use if the insured is diagnosed with a terminal, chronic, or critical illness. The insured will need to submit proof of diagnose to claim the benefits and the payout method will differ by insurance carrier.
- Long-term Care rider provides the insured who thinks they will live in a nursing home or need home care at some point in their lives with monthly payments to cover the cost. This is not to be confused with the Accelerate Death Benefit rider – chronic illness. While similar, insured must be unable to do two out of the six daily living activities to qualify for chronic illness.
- Return of Premium (ROP) rider addresses the insured’s concern of outliving his/her term policy. As the name suggests, ROP will return the premium if the insured is alive and have not claimed the death benefit by the end of term duration. This rider is usually offered on term life policies and tends to be costly.
- Waiver of Premium rider waives future premiums for the insured in the event the insured becomes permanently disabled or loses income due to injury or illness till the insured can work again.
- Accidental Death Benefit rider increases the death benefit if the insured’s cause of death is ruled an accident. Make sure to read the insurance carrier’s policy on what is considered an accidental death as different carriers define accidental deaths differently.
- Children’s Term rider provides children of the insured with term coverage. Most insurance carriers will allow the term coverage to be converted to permanent coverage later, usually when the child reaches the age of maturity.
- Term Conversion rider offers the insured the opportunity to convert their term life policy to a permanent life policy without a medical exam.
- Guaranteed Insurability rider will guarantee that the insured is insurable if the insured decides to increase coverage later. This rider may have an age limit and is ideal for those who want to purchase more coverage later.
- No-Lapse Guarantee rider guarantees that the policy will not lapse if the cash value account reaches zero, as long as premiums are paid as scheduled.
Riders allow the insured to customize their policy to closely meet their needs. The riders explained today are just some of the more common riders available. Whether the insured needs long-term care or wants to ensure they get their premium back if they don’t use their term policy, there are many riders to select from. Riders varies between insurance carriers and types of life insurance. Make sure to shop around and read through the different riders offered by each insurance carrier. If you need assistance, please contact Transglobal today!
Author: Maya Wiglesworth
