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Demystifying Life Insurance Riders
Demystifying Life Insurance Riders
September 11, 2023 / Kale Havervold
Demystifying Life Insurance Riders
September 11, 2023 / Kale Havervold

Whether you have children or a spouse that depends on you, life insurance can provide them with financial security if you pass away. It does so by providing a payout upon your death that can help them deal with debt, bills, living expenses, and more.

There are many different types of life insurance policies, including term life insurance, whole life insurance, and universal life insurance. Term life insurance covers you for a predetermined amount of time, normally 5 to 30 years, while a whole life policy covers you for your entire life. Universal life insurance is similar to whole life, with the added benefit of being able to adjust your premiums/death benefit over time.

But in addition to a life insurance policy itself, there are life insurance riders you need to be aware of. These are additional benefits that are purchased and added to basic life insurance policies, allowing you to customize your coverage.

Just like with life insurance itself, there are various kinds of riders, each providing a different benefit or extending your coverage in a unique way. This guide goes through some of the most common and important life insurance riders to consider when getting a life insurance policy.

Accidental Death Benefit Rider: Protecting Against the Unexpected

The accidental death benefit rider adds an extra benefit to your policy if you die from an accident. You can generally choose how much extra it pays, and the total amount you want will determine the added cost. The higher the benefit, the more it’ll cost to add to your policy.

You need to think if this extra cost is worth the additional benefit, or if the amount your family gets from the basic life insurance policy is enough. An accidental death rider is generally best for those who have a dangerous job, such as being a roofer, working in construction, or working with heavy machinery. This is because the riskier your lifestyle, the higher the chances of an accident occurring.

When considering an accidental death benefit rider, you should investigate what the life insurance company considers an accident. Generally, these policies cover deaths from accidents like falls, choking, injuries at the workplace, or injuries caused by a natural disaster.

On the other hand, things like drug overdose, death from illnesses, death from participating in extreme sports, death caused by illegal activities, and various others won’t be covered.

Always read through the policy in detail to ensure you understand what counts as an accident and what doesn’t. It may differ from company to company, so don’t assume something is covered in your policy just because it is covered in another.

Keep in mind that accidental death benefit riders generally end at a certain age set by the insurance company, so be aware of that before you add it to your policy.

Guaranteed Insurability Rider: Securing Future Coverage Needs

A guaranteed insurability rider works by letting you add coverage/increase your death benefit on your policy in the future, without having to take another medical exam to qualify. So even if your health declines as you age, you’ll still be able to get more coverage.

If you don’t have this rider, you could be denied the additional coverage you need if your health has worsened, be required to pay much more for it, or be limited in the coverage you can get.

Every 3-5 years, and within a few months of a major life event like a marriage or having a baby, you get the option to buy more coverage with a guaranteed insurability rider. As you could imagine, this type of rider is especially good for individuals who are going through change in their lives. This is because these life changes often mean more financial obligations and thus a need for a larger death benefit.

Those who have a condition that may worsen over time or a history of serious illness in their family can also benefit from this rider.

But before adding this rider to your policy, think carefully about your future outlook. You might not need extra coverage now, but will that change? If not, then it might not be necessary.

Also, keep in mind that guaranteed insurability riders may have a cutoff age. This is often between 40 and 50 years old. So if you want to up your coverage once you’ve aged beyond the cutoff, you’ll have to take a medical exam even with this rider.

Waiver of Premium Rider: Safeguarding Your Financial Stability

This rider will waive your life insurance premiums if you become disabled and can no longer work. It can also waive premiums if you can’t work because of an illness or injury.

If you’re the primary earner in your household, losing your income can be terrifying and lead to a lot of uncertainties in life. This rider helps you maintain a sense of financial stability and ensures your base policy remains active without you having to pay every month for it.

Before you purchase this rider, make sure you know what qualifies as a disability. It differs from company to company, so read the terms and conditions or ask an agent to learn the definition for your specific insurer. If you don’t do this, you could end up paying for a rider that can’t help you in your time of need.

One major consideration to make is that this rider has a cutoff age. It’s normally 65 years old, but this can vary from one insurer to the next. Once you reach the age limit, you’ll need to resume paying your premium if you want to keep your life insurance active. Also, if you’re eventually able to go back to work, your premiums have to be paid as normal.

Another consideration to make is whether to go with this rider or a disability insurance policy. The latter will be more expensive than adding a rider to your existing policy, but has more comprehensive benefits such as covering expenses and paying you a benefit based on how much income you lost.

Long-Term Care Rider: Preparing for Future Healthcare Needs

As we get older, many of us require long-term care in some capacity. Long-term care is when an individual requires assistance with some type of daily activity. This could be needing help with feeding themselves, moving around home, personal hygiene, getting dressed, using the bathroom, and more. Assistance can take place in the home or in a facility like a nursing home.

While this type of care is necessary for many people as they age, it may get expensive. It can cost hundreds or even thousands of dollars every month depending on what type of assistance is needed and how often it’s required.

A long-term care rider works with life insurance by letting you access a portion of the death benefit early to pay for long-term care that regular health insurance may not cover. In some cases you’ll get a set amount each month to spend, and in others you’ll need to submit monthly bills and get reimbursed.

The benefits of this rider include peace of mind that you can pay for the care you require and don’t have to tap into your savings or sell assets to do so. You also get the freedom to spend the benefit on whatever kind of care you want in many cases.

However, there are some limitations. Adding a long-term care rider onto your policy can make premiums much more expensive, and will reduce the eventual payment your beneficiaries receive. There’s often a waiting period before you can actually use your benefit for care costs, too.

Before adding this rider to your policy, consider that each provider will have different rules as to how it works and who can qualify. In many cases, a medical professional will have to confirm that you can’t perform some daily activities in order for the rider to kick in.

You should also think about whether the rider is sufficient or if you would feel more comfortable with a standalone long-term care insurance policy.

Exploring Policy Options with Riders

When researching life insurance providers, keep in mind that not all will offer every type of rider. So do your homework and check out the websites of various insurance companies before deciding who to work with. Also, each company may differ in terms of the quality or contents of its riders.

As a result, it can be valuable to compare not only what riders insurance companies provide but the specific terms of each rider as well. For example, the accidental death benefit rider of one company may consider something an accident that another company doesn’t.

Choose the provider with the riders that best line up with your requirements. In addition to comparing riders, you should look at and compare policy options and pricing from different providers. If you go with the first company you look up, you could end up leaving a better deal on the table elsewhere.

Also, don’t forget about the fine print and all of the policy details. These policies are complex documents, but it’s important to read through the entire thing and ensure you understand it. This can take time. But it’s well worth it to make sure nothing is missed or glossed over.

The Bottom Line on Life Insurance Riders

Life insurance riders can improve coverage and allow you to customize and fine-tune your policy. They can give you peace of mind and ensure that you’re protected from whatever life might throw your way.

Before choosing your riders or getting life insurance, make sure to be aware of your needs and understand the options available for you. Don’t only think about your needs right now but also in the future.

If you don’t consider your situation, you can easily end up paying for riders you don’t need. You may also miss out on riders that could have saved you a lot of money throughout your life or gotten your family a larger benefit when you eventually pass.

Take the next step in securing your financial future by considering which riders make sense for your unique situation. Do your homework on the riders available with your life insurance policy, or ensure you consider riders when deciding which insurance company to work with.

Finally, make sure to reach out to a professional within your chosen insurance company if you need assistance, guidance, or want to purchase a rider for your policy.

By Kale Havervold
Kale Haverold is an esteemed freelance writer, leveraging over five years of expertise in the fields of business and personal finance to analyze and comprehensively review online colleges. With a BSc in Sociology, a Minor in E-commerce, and a certificate in Business Administration, Kale brings a unique blend of academic insight and practical knowledge to his evaluations of online educational institutions. His passion for sharing knowledge through research-driven, easily digestible articles has led to his work being featured on prominent platforms such as Yahoo, Expert Market, Hardbacon, and Loans Canada.