Life insurance covers plenty of ground. It has a death benefit should the worst happen– plus, if you get a permanent policy you can enjoy a cash-value element that grows over time completely tax-free. But did you know it’s also possible to customize your coverage with life insurance riders?
Now, you might ask, “what is a rider?”. And if that happens to be the case, you’ve come to the right place. We’ve put this guide together, detailing everything you need to know about life insurance riders and how they can help you.
What are life insurance riders?
Life insurance riders are an extra that you can add to your life insurance policy, adding a layer of customization in the process. They add benefits to or amend the terms of your policy, either providing more coverage options or potentially limiting or restricting it.
Riders usually require underwriting, though it tends to be minimal. The type of rider you get will also depend on the policy you have or are taking out, as well as the insurance company offering the policy and the state where you live.
How much do riders cost?
There’s no set amount that you’re required to pay for life insurance riders: some are automatically added to your policy, others are free add-ons, and some come at a premium and need paying for.
What are the benefits of life insurance riders?
Life insurance riders can provide additional benefits to your policy, which is handy if you’re looking for a bit more from your coverage. They also make your life insurance policy highly customizable, meaning you can tailor coverage to your needs. Some benefits include:
- The ability to access your death benefit early
- Purchase additional life insurance
- Waive your premiums
Riders are highly customizable and give you plenty of flexibility to create a premium policy tailored to your needs. Below, we’ve listed some of the most common life insurance riders to give you a better idea about add-ons that could boost your policy.
The most common life insurance riders
Guaranteed insurability rider
A guaranteed insurability rider allows you to purchase additional coverage without the need to take further medical examinations. You might opt for this type of rider if circumstances in your life have changed, such as having a child, getting married, or increasing your income. Guaranteed insurability riders also allow you to apply for extra coverage without needing to provide evidence of insurability–though they end at a specific age based on the provider’s requirements.
Accelerated death benefits
With an accelerated death benefit rider, you can potentially unlock your death benefit before you pass. If, for example, you fall seriously ill or are unable to work because of injury, you may find it hard to keep up with payments without regular income. An accelerated death benefit rider can provide you with a stable income when you’re unable to work.
Long-term care rider
Long-term care riders are becoming increasingly popular with women, as they tend to live longer than men and may need care later in life if they don’t have a spouse or someone to help out. However, they’re not solely exclusive to females and benefit anyone who may need nursing or home care later in life.
Waiver of premium rider
A waiver of premium rider allows you to stop paying premiums on your policy and continuing receiving the benefits if you become disabled, are unable to work, or can’t afford to pay for your coverage. With this rider in place your policy stays intact without needing to make any changes to your coverage.
Term insurance rider
A term insurance rider can be added to a whole life or universal life policy and provides a fixed amount of term insurance for a set time. You may opt for this if you need additional coverage for a specific amount of time that’s above the current face value of your current policy.
Child term rider
Getting a term rider offers coverage in case a child dies before a certain age. And if the child reaches maturity, the term plan can be switched to permanent coverage offering five times the original amount without the need for any medical exams.
Return of premium rider
A return of premium rider offers a refund of the premiums paid on a term life insurance policy if the policyholder doesn’t die during the term. Essentially, this reduces the net cost to zero.
Should you get riders if you have a permanent life insurance policy?
Permanent life insurance policies offer more benefits than term coverage, including a cash-value aspect and tax-free savings. People who take out or convert to permanent life insurance tend to favor riders more than those with a term policy.
That’s because they already use their perm coverage as more than a death benefit and understand the plus-points of having such extensive cover. The cash-value element can be used as a type of investment account accessed later in life, and you can add additional riders to your policy if necessary.
How to add riders
The best way to add life insurance riders involves doing it when you buy your base life insurance policy. Adding them to a policy at a later date will likely mean you need to go through the underwriting process again and may even require a medical exam.
Any changes to policies mean the insurance company is increasing the chance of paying out from a rider. Therefore, they’ll want to verify your health. However, if you’re removing a rider from your policy, you’ll likely only need to fill out a form for authorization.
In conclusion: Should I get a rider?
Whether or not you need a rider comes down to your personal circumstances. Still, life insurance riders can be helpful ways of customizing your policy and providing you with extra layers of protection for different types of coverage. They could also be a cost-effective method for covering yourself without paying for a separate life insurance policy. At the very least, it’s worth exploring the available riders when you take out your life insurance policy.