When it comes to life insurance, some might already know that term life and permanent life are the two most common types of policies. Term offers protection for a specified number of years while permanent offers protection to a specified age, and potentially beyond that age. What some might not know is there are various riders that can be added to these policies that can customize the benefits. Before we look at some of the most common riders, let’s first define what a rider is.
A rider is an optional add-on to a life insurance policy that can add benefits or adjust the coverage provided. Adding a rider will typically require additional premiums to be calculated into the overall policy cost. These extra premiums vary in cost depending on the type of rider and what benefits it adds to the policy. Some riders are not available based on the age of the individual applying for insurance, the health rating, or the amount of coverage being applied for. While there are many, let’s go over some of the most frequently used riders.
- Waiver of Premium: This is a rider designed to waive the insured’s premium in the event they become totally disabled due to illness or injury. If you have a term policy, certain companies allow your term to be converted to permanent and will not require premium payments while disabled. This rider is an effective way to maintain life insurance if you are unable to work.
- Accelerated Death Benefit: Permits the insured to advance all or a portion of their death benefit as a reimbursement for costs endured due to certain conditions or illnesses that require long-term care. Qualifications for this rider vary by company.
- Accidental Death Benefit: Provides additional death benefit to the beneficiary in the event the insured dies from an accident. Additional coverage amounts will vary.
- Guaranteed Insurability: This rider allows the insured to purchase additional life insurance without needing to provide their insurability. There are specific time frames or life events where these additional purchases are permitted, and typically do not extend for the entire duration of a policy. There are also limitations on the amount of coverage that can be purchased.
- Return of Premium: This rider is largely particular to term life. If the insured does not die during the indicated term years, the premiums paid will be refunded.
- Child Rider: Pays death benefit if child passes away. This rider covers children from 15 days old until they reach a certain age that is often between 18 and 25 years old. When this coverage ends, the child can usually convert to an individual life policy. There are normally low coverage amounts available for this rider.
Determining what riders to add is circumstantial, the same as deciding the best type of life insurance. Contact the experts at Wholehan to discuss how certain life policies and riders can be advantageous for your clients!