What Are Life Insurance Riders?
Life insurance riders are, so to say, mini insurance policies within an insurance policy. When you have any one of them, you have an extra protection for it. But the difference is that the extra protections do not come apart from the mother policy—the term or the whole life insurance plan that you purchase. They are purchased annexations mostly to term insurance plans.
You have to buy any of these life insurance riders for extra payment.
Some companies, however, may offer certain riders free of cost with a couple of their policies. But that can be rare cases. Surely, if you have any such opportunity you should grab it without a second thought.
Types of Life Insurance Riders
There are around 12 life insurance riders. And, when you shop, your agent is most likely to ask you to consider a couple of them. He is going to sound persuasive focusing on the benefits and necessity of the riders he would exclusively suggest for you to buy. They may be any of the following ones:
- Child Insurance Rider
- Waiver of Premium Rider
- Term Conversion Rider
- Critical Illness Rider
- Accidental Death Benefit Rider
- Return of Premium Rider
- Guaranteed Insurability Rider
- Long Term Care Rider
- Disability Income Rider
- Spousal Rider
- Family Income Benefit Rider
- Accelerated Death Benefit Rider
What Does Each of the Life Insurance Riders Mean?
1. Child Insurance Rider
Child insurance rider provides financial protection to your children until they reach the typical maturity age of 18. Some companies may offer the protection up to age 21 or even more. The protection comes in the form of a death benefit which is actually set to meet the funeral costs. The figure usually ranges between $10,000 to %20,000. You do not need to buy separate riders for each child. Instead, the cost works in a per thousand basis to cover all your children.
A notable feature of this life insurance rider is that many companies allow the child to convert it to a separate policy when it matures. But that needs action on the child’s part and any discontinuation nullifies the opportunity.
2. Waiver of Premium Rider
A waiver of premium rider exempts you from paying your premiums if you happen to become unable to work for a disability. In the event of such a situation occurring to you, the waiver will be applicable to you for the rest of your term; but not exceeding 65. That means, you will be covered as if you paid all your premiums.
3. Term Conversion Rider
Usually, you can covert a term life plan to a whole insurance during the company-specified initial years. Term conversion rider brings for you the opportunity to make it a whole life plan till the end of the term. It can be a pretty useful tool for you to have continuous protection. But remember, having this will not lower your whole life insurance policy’ s rate by any means.
4. Critical Illness Rider
This life insurance rider covers you in the event of any of the critical illnesses mentioned in the policy document. Illnesses typically but variably cover statuses like kidney failure, brain stroke, coronary thrombosis, organ transplant etc. The insured receives the total or according-as-specified sum of money as benefit.
5. Accidental Death Benefit Rider
This rider is also known as the Double Indemnity Rider. If you die by an accident that falls in the criteria of accidental death defined by the insurer, your heirs will benefit from this rider. They will receive an additional benefit by dint of this rider. The amount is typically twice the size of the original benefit.
6. Return of Premium Rider
By default, a term life insurance policy returns you empty-handed when you outlive the policy term. But addition of a return of premium rider returns all your premiums at the end of the policy. That means if you happen to die within the policy tenure, the insured receives the full death benefit. And, if you outlive, you get back all your premiums.
Even if you forgo this policy earlier you can avail of the benefit. But remember that the policy must have been continued for specified years for the benefit to come up. And whether you will receive all the premiums or not depends on how long you have continued the policy.
A return of premium rider is also available as a stand-alone policy. Click here to know more about Return of Premium policy.
7. Guaranteed Insurability Rider
This life insurance rider protects your insurability. Because of your health status, you may be unfit for buying more life insurance in the future. The guaranteed insurability rider provides you shield against falling in uninsurability no matter what your health status is. You can raise your coverage at specified intervals or in the wake of certain changes in life situations like marriage, birth of a child or adoption of a child. However, remember that this applies only to the company you purchase the insurance from.
8. Long Term Care Rider
A long-term care rider provides a certain amount of money to the insured in the event of the policyholder’s requiring assisted living. The amount of money that he receives is a pre-paid from the original death benefit. However, this rider does not provide the protection until an indefinite time. Usually it may extend up to 6 months.
9. Disability Income Rider
This life insurance rider works as an income replacement tool for the policyholder. A monthly amount of money is given to him in the event of typically an accidental disability that puts him off work. The amount of money to be given and the protection duration are predefined. The duration may extend from several months to the length of the disability.
10. Spouse Rider
A spousal rider is, so to say, a 2-in-1 policy. Adding this life insurance rider to your policy provides simultaneous protection to both the partners. No matter who dies first, the outliving partner receives the benefit.
11. Family Income Benefit Rider
A family income benefit rider is different from other riders. It comes posthumously to the beneficiaries. When the policyholder dies, a monthly income equal to the policyholder’s monthly salary comes to the family for a certain period of time. This benefit is, of course, additional to the death benefit. As a rule, the earlier the policyholder dies, the longer the beneficiaries receive the income benefit. And the opposite happens when the policyholder dies the later.
12. Accelerated Death Benefit Rider
The accelerated death benefit rider comes to use when a policyholder is diagnosed with a terminal illness. Upon applying, a portion of the death benefit is pre-paid to the beneficiaries so that they may take care of the policyholder. While this money is given to them for the take-care purpose, they are free to use the money for any purposes.
A Piece of Advice
Many of these life insurance riders may seem worth buying to you. But we would ask you to keep two things in mind: that they will raise the cost of your insurance and that they are not always what they sound like. The terms and conditions of these riders are often very strict in nature. Unless you succeed to meet the criteria, they may not benefit you the way you might think of.
So, reading through the riders is very important. Also, if you really need a rider or not is worth a thought. First think whether you need a rider or not and if you find any of them useful, try to have a clear idea about it.