Life insurance plans are rarely one-size-fits-all. Typically, you’ll have the core of your plan’s coverage, and then, depending on your unique situation, you can add on extra benefits.
These add-ons are called riders, and they can provide additional protection beyond the payout at the time of your death. These riders aren’t free. They’ll add to the cost of your overall plan, but the additional cost is usually low relative to the cost of your policy.
There are eight common life insurance riders that may apply to your situation. We’ll cover them below so that you’ll be fully informed about your options when you apply for your life insurance policy and which riders you might need.
When you apply for your life insurance policy, you’ll usually need a medical exam to underwrite the policy, depending on the amount of coverage. A guaranteed insurability rider allows you to purchase additional life insurance later without needing another medical exam.
It might be appropriate if you anticipate needing to purchase additional life insurance in the future, for example, after the birth of your children. If you think your health might decline as you age, a guaranteed insurability rider can protect against the possibility that you will be denied coverage down the road due to those health issues.
If you were to die due to an accident, a typical life insurance policy would pay out the full benefit. By adding an accidental death rider to your policy, your beneficiaries will receive more than the face value of your policy.
The accidental death rider will double the payout your beneficiaries will receive as long as your death is an accident. An accidental death rider might be a good choice if you are the sole earner for your family, and your sudden, premature death would be catastrophic for your family.
Waiver of Premium Rider
When you buy life insurance, you’re responsible for paying your premiums annually or monthly to keep your policy in good standing. If you become injured, ill, or disabled, you’re still responsible for paying your premiums. Otherwise, your policy coverage will lapse.
The waiver of premium riders, sometimes called disability income insurance riders, will waive your premiums if you become permanently disabled or lose your income because you got hurt or sick. This rider will keep your policy in good standing, even if you can’t afford to pay the premiums.
This rider has some limitations. For example, each insurer has its own definition of what “totally disabled” means.
However, generally speaking, Waiver of Premium is good if you are the primary breadwinner, and your disability could have a significant impact on your family’s ability to pay your life insurance premiums.
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Family Income Benefit
This family term insurance rider is very straightforward. If you die, your family will receive a regular monthly income instead of the lump sum.
This rider is a good option if you are the sole breadwinner. It helps your family avoid financial hardship by ensuring they have a steady, reliable source of income after you pass away.
Accelerated Death Benefit
Life insurance policies typically only payout when the person named on the policy dies. But what if you become terminally ill, which shortens your lifespan and results in a costly final few years?
In this case, the accelerated death benefit would advance a portion of your life insurance payout for you to use in the years leading up to your death.
You can often add the accelerated death benefit rider to your policy at no additional cost, so it’s a good idea to consider this policy, especially if there is a history of illness in your family.
In most cases, your insurer will advance you a portion of the total death benefit, and that percentage varies from insurer to insurer. Also, the definition of “terminal illness” varies depending on the insurer. You should review the exclusions before buying this rider.
Child Term Rider
If you have children, their death might seem unthinkable, but it is a possibility.
A child term rider provides a death benefit if one of your children dies. This rider is a term policy, which means it expires, usually when the child reaches the age of majority. However, you can also convert this policy into a permanent policy, but this will increase its cost.
Child term riders typically finance a bereavement period.
Long-term care riders provide a monthly payout if you have to stay in a nursing home or receive in-home care.
If you think that your retirement funds won’t be enough to cover this cost, this rider could be a good choice. Alternatively, you can also purchase long-term care insurance, a dedicated policy with a similar function.
Return of Premium
This rider allows you to receive the entirety of your premium payments back at the end of your term. If you die, your premiums will go to your beneficiaries instead.
There are many different types of return of premium riders, and they are most commonly available with whole life insurance (versus the more straightforward term life insurance). You must carefully read the specifics of this rider, so you understand precisely how much you or your family will get back at the end of your term.
The Bottom Line
Most life insurance policies are very customizable to meet your needs, but the riders above add a suite of options to suit your unique situation.
It’s unlikely you’ll need all of these riders, and adding them all will increase the cost of your insurance policy, but there may be one or two on this list that will help give your family the extra coverage they need in the event of your untimely death.
If you’re considering adding any of these insurance riders to your policy, make sure to read the fine print carefully to ensure your family gets the coverage they need when they need it.
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