Buying life insurance may be one of those essential chores you have been doing everything to put off and let’s be honest—it’s hardly a top choice of conversation. Despite the ominous implications, it is a necessity which we all need to prioritize in our lives.
Picking the right policy can be tricky. There is a seemingly endless array of add-ons, coverage options, exclusions, and benefits. Cutting through the noise and finding the option which is the best fit for you and your family can be difficult.
You don’t want to end up paying for things you will never benefit from, but then, you don’t want your family to be left short in the event of the worst happens.
A rider can be the ideal solution to this common problem. These are additional benefits which can be bought and added on to the most basic insurance policy, and offer a great way to increase the coverage of a policy without paying extortionate premiums.
The Types Of Life Insurance Riders
Before finalizing your life insurance policy, it is important to consider whether you need any riders to enhance your benefits—and to do that you need to understand the different types of riders which are available.
Renewal Provision, or Guaranteed Insurability Rider
This rider is the most basic and accessible of all the options, as there is the opportunity to purchase additional insurance coverage without the need for any further medical examination which may alter your premiums. This option is best if you have recently experienced a significant change in your life circumstances, such as getting married, receiving an increase in your income, or having a child.
It is also useful as you age, as it offers the chance to apply for extra coverage which may be required without having to undergo a medical or provide any evidence of being fit to insure. This rider can also be useful when you reach the end of your base policy, as it allows the renewal of coverage with no checkup.
Double Indemnity or Accidental Death Rider
If the insured policyholder dies as the result of an accident, the rider will pay out the additional benefit. This payout is usually equivalent to the face amount contained in the original policy, resulting in double the amount of benefit being awarded.
The important consideration with this type of policy is the meaning of the word ‘accident’ according to your insurance company. This definition tends to vary between insurance companies, so take care that you are sure about the terms you are signing up for. If you have a family, this is an ideal rider, mainly if you are the sole or primary income provider within the home.
Waiver of Premium Rider
This rider allows the insured party to waive all future premiums if certain circumstances occur. Should the policyholder become permanently disabled, or if they lose all income as a direct result of injury or illness before a predetermined age, they will be able to waive the payment of all future premiums. If the main income earner in a family is unable to work, the results can be devastating for the remaining members.
Taking out this rider means that there is one less thing to worry about if this occurs, and you can relax in the knowledge that you don’t have to pay until the breadwinner can work again. As with ‘accident,’ it is important to check the meaning of ‘disabled’ according to the terms of your insurance provider; this tends to vary.
Family Income Benefit Rider
This rider is recommended if you have a family. In the event of the death of the insured, the family will receive a steady flow of income every month to the family members left behind.
You will need to determine upon purchase the number of years that you want the money to continue for, and this can provide immense peace of mind and reassurance that your family will be protected in the event of your death.
Accelerated Death Benefit Rider
This rider covers you in the event of being diagnosed with a terminal illness which is set to shorten your lifespan considerably. Insurers will average around 25-40 percent of the total death benefit included in the base policy.
It is important to remember that upon your death, the insurance company can subtract any amount received in advance plus interest from your beneficiaries. There is usually only a small premium charged for the rider if any is charged at all. Again, check with your insurance company for their definition of the term ‘terminal illness’.
Child Term Rider
If a child dies before a specified age, this rider will provide a death benefit. It can also provide benefits after the child reaches the age of maturity when it is transferred into a permanent insurance policy.
In addition, when converted, this new policy will offer coverage up to five times the original amount, without the need for any additional medical exams.
Long-Term Care Rider
This policy will cover you if you are required to receive home care or stay in a nursing home, and will provide monthly payments to cover your costs. It can be purchased in addition to traditional long-term care insurance plans, but offer benefits and extended care, depending on the terms.
Return of Premium Rider
This rider is a long-term plan, where the insured pays marginal premiums throughout the duration of the policy.
At the end of the term, the premiums are repaid to you in full. If you die in the interim, any beneficiaries will receive the total amount of paid premiums. Specific conditions vary between providers, so do your research to ensure that you are receiving the best possible deal.
A Consideration with Life Insurance Riders
A rider can be an excellent investment, but it is essential to shop around and do your homework before you commit to purchasing a life insurance policy. The terms and conditions can vary between different insurers, as can the rates of the premium and the coverage offered.
In some cases, claiming on the rider can result in termination of the supplement, while continuing to receive basic insurance from the original policy. To help you get to grips and highlight the pros and cons, let’s take an in-depth look at life insurance riders.
Learning About Life Insurance
Before we discuss the benefits of riders, it is helpful to understand the different types of life insurance policies which are available. These include:
A term policy is usually the cheapest option and is the ideal base enhance with a rider. It is simple and easy to understand and this, combined with the lower prices, means it is regularly considered the most popular.
Policies are basic—you just pick the term length and the death benefit amount. In some situations, you may not even be required to complete a medical examination, meaning that is is a more accessible option.
Rates will stay the same for the duration of the term, and there is a range of popular term lengths, with the most common being 10 years, 20 years or 30 years. Different companies and providers will offer different terms, so it is a good idea to do your research.
Permanent Life Insurance
A permanent life insurance policy can be an ideal choice if you are looking to secure lifetime coverage or cash value. As a bonus, there will be no time limit on the death benefit—a common side effect for term life insurance. The cash value will build up over the lifetime of the policy, and you will eventually have the opportunity to take policy loans against it, or else to draw money from it.
These policies have four main types to choose from:
Whole Life Insurance
Whole life insurance, or traditional life insurance, is the oldest type of life insurance and is designed to cover you for your entire life. The premiums and the death benefit are fixed throughout the life of the policy, and the cash value will grow throughout its duration. It is intended to be fully funded up to the age of 100; if you pass away before this, the benefit goes to the beneficiary.
Universal Life Insurance
This coverage is a more flexible option. The premiums change depending on your circumstances, which can be great if you need to be adaptable, but it is crucial to keep up your premiums to prevent your policy from lapsing.
Index Universal Life Insurance
This policy bases its cash growth value around the equity index performance. It includes a guaranteed minimum interest rate, designed to protect you and your money should the indexes go down. This is based on the claims-paying ability, and the financial strength of the company, meaning you are always protected.
Life insurance is one essential which really can’t be negotiated, so it is vital that you do your research and find the best deal for you. Remember that a cheaper deal can actually benefit you—adding on a rider allows you to get the coverage you need at premiums you can afford.