A basic life insurance policy offers financial protection for your loved ones after you pass away. It can keep them from being burdened by your debt or the costs of your funeral. But sometimes you need more than just a basic policy.
If that’s the case, you can purchase a life insurance rider to add extra benefits to your life insurance policy. In this article, we’ll explain what a life insurance rider is, what types of riders you can get and whether or not they’re worth the extra cost.
What is an insurance rider?
An insurance rider is an add-on policy that provides additional coverage and extends the terms and conditions of your policy. For instance, many life insurance riders allow you to use the money from your policy before you die. Life insurance companies sell a variety of riders which you can use to personalize your coverage based on your needs.
As a policyholder, you can purchase as many riders as your life insurance provider sells. That means you have full control over how much coverage you have. However, each rider you add will cause your premium to increase. Some riders might be worth the money while others won’t add any significant benefit.
Types of life insurance riders
There are many different types of life insurance riders. Here are some of the most common ones:
Accelerated death benefit rider
An accelerated death benefit rider is one of the most popular life insurance riders. It allows the policyholder to use their death benefits if they get diagnosed with a terminal illness that could cause an early death. Every insurance company has their own list of covered terminal illnesses, so it’s important to see what’s covered before adding this particular rider. Another perk of the accelerated death benefit rider is that many insurance providers offer it for free.
Long-term care rider
If you need to stay at an assisted living facility or receive home care as you get older, a long-term care rider will help you cover the monthly payments. Some examples of qualifying long-term centers are nursing homes, adult day care, hospice and memory care facilities. Some insurance companies allow the long-term care rider to be used for family members of the policyholder.
Accidental death rider
After you pass away, your beneficiaries receive compensation from your policy’s death benefit. However, if your death is due to accidental bodily injury, an accidental death rider will allow your beneficiaries to receive double the amount of money in the policy. Keep in mind that not all accidents are covered. Risky activities, like skydiving, are not covered. But if you work in a factory and get fatally injured by equipment or machinery then that would qualify.
Waiver of premium rider
If you become disabled, or lose your income due to injury or illness, the waiver of premium rider allows you to stop paying your monthly premium. When you’re able to go back to work, you’ll be required to start making the payments again. The only contingency to the waiver of premium rider is that you’re only covered up to a certain age—typically until the age of retirement.
Guaranteed insurability rider
In order to get approved for a life insurance policy, you need to complete and pass a medical exam. With a guaranteed insurability rider, you can adjust your coverage throughout your lifetime without needing to take another medical exam. This rider is especially valuable because it allows you to apply for additional coverage if your health declines without a reevaluation.
Return of premium rider
With a return of premium rider, you pay a small monthly premium and when your policy’s term ends you recoup the money paid. If you pass away before the term is up, your beneficiaries will receive the money. This is typically one of the most expensive riders you can purchase.
Family income benefit rider
If you are the only person in your family that has an income, consider purchasing a family income benefit rider. This add-on policy will provide a consistent income to your family after you pass away, in addition to the lump-sum they’ll receive from the death benefit.
Child term rider
A child term rider will pay out a death benefit in the event that a child passes away before a certain age. This type of rider is only available for term life insurance policies. Once the child becomes an adult, the term policy can be converted into a permanent life insurance policy with up to five times the amount of original coverage without them needing a health exam.
Are insurance riders worth it?
Life insurance riders will increase your premium, so you might be wondering if it’s worth the added cost. Ultimately, it depends on your personal needs and your financial situation. Chances are, you don’t need to purchase every rider that your insurance company offers.
For instance, if you have a child who suffers from a serious illness, you might consider purchasing a child term rider. But if you don’t have children and don’t plan on having them in the future, that rider provides no benefit.
Additionally, consider that every rider will increase your premium by a different amount. A return of premium rider is one of the more expensive riders you can buy and it offers very little value for the money you spend. But if your insurance provider offers an accelerated death benefit rider for little to no cost, it’s probably worth adding.
Frequently asked questions
What is the best life insurance rider?
Life insurance riders allow you to personalize your insurance coverage, so the best life insurance rider is the one that best covers your specific needs. For example, if you’re worried about being able to afford the cost of assisted living later in life, consider a long-term care rider. If you provide the only income for your family, getting a family income rider will ensure your family is taken care of financially if you pass away.
Can family members take advantage of my life insurance riders?
Yes, certain riders are designed to cover family members and beneficiaries, rather than the policyholder. Every insurance company has different terms and conditions for the riders they sell, so make sure you understand what is covered and who is covered before purchasing a rider.
How many life insurance riders can you purchase?
You can purchase as many life insurance riders as you want, although you probably won’t need to buy every rider your insurer sells. Remember that every life insurance rider you add will increase your premium. The more riders you have, the more coverage you have, but you’ll pay a significant amount for that added protection.