Riders are added to a life insurance policy for an extra premium and provide additional supplemental benefits. Riders are available with most life insurance policies including term, universal and whole life. Following is a list of riders typically available with most life insurance policies.
- Accelerated Death Benefit Rider or Living Needs Rider. This rider enables the policy owner to receive a percentage of the policy proceeds (death benefit) in advance of death if the insured is diagnosed with a terminal illness. Depending upon the company, before benefits are payable, there must be a medical diagnosis whereby the insured is not expected to live beyond 12-24 months. There are usually limits to the amount of benefits available. For example, up to 75% of the death benefit may be accessed but no more than $500,000 in total benefits.
The living needs rider is a wonderful benefit proving access to cash to cover medical procedures, payoff a mortgage, take a vacation and plan the estate. The good news is that most life insurance companies offer the accelerated death benefit rider at no charge. Conditions of this rider vary widely among life insurance companies so be sure you understand your options. For more details, see the sample accelerated benefit rider.
- Waiver of Premium Rider or Disability Waiver of Premium. The waiver of premium rider is essentially disability insurance to cover your life insurance premium if you become disabled. If you suffer disability, the insurance company will “waive” your premium for as long as you are disabled.
The waiver of premium rider is valuable but can be expensive and for that reason most cheap term policies do not have it. However, disability waiver of premium is very valuable for whole life policies when premiums are significantly higher. The way the waiver of premium rider works varies from company to company and from policy to policy so make sure that you read the fine print! Additionally, a waiver of premium rider is not a substitute for individual disability income insurance.
- Accidental Death and Dismemberment Rider (AD&D). The accidental death and dismemberment rider is available with some but not all life insurance policies. It is designed to provide a multiple of the base policy’s death benefit, usually one or two times the original face amount if you die from accidental causes or suffers the loss of eyesight in both eyes or the use of both limbs.
While there are only limited “accidental” circumstances where these benefits are payable, you may be able be able to pick-up these supplemental benefits at a very low rate. When considering the AD & D rider, you will want to carefully read the conditions for payment of benefits as they are very restrictive. Additionally, accidental insurance is never a substitute for ordinary life insurance coverage.
- Children’s Term Insurance Rider. Child riders are offered on most life insurance policies and provide supplemental life insurance coverage for your children. Coverage is usually available in increments of $5,000 up to $25,000. With most companies, the insurance is effective until your child reaches the age of 18 and if they are in college coverage may be effective to their age 25.
The cost for a child rider is on average about $30.00 a year per $5,000 of benefit and covers all eligible children. Therefore the cost is insignificant in most instances. However, on a relative basis, a children’s term insurance rider is quite costly when compared to ordinary term insurance. Child riders make more sense if you have more than one child and the more children you have the better deal it is!
- Spousal Term Insurance Rider. A spousal term insurance rider allows you to tack on to your policy an additional amount of term life insurance for your spouse without having to take out another separate policy. Spousal term riders are usually10-year level term plans that are renewable beyond 10 years.
When applying for the spousal term rider, an insurance physical will be required. If you have are considering covering your spouse, you may want to see if there are options to add this rider and compare the cost versus simply applying for another separate policy for your spouse.
Life insurance policy riders provide added supplemental policy benefits for an extra cost. Some if not all of the riders above are available with most every life insurance company. If you are shopping for life insurance, you need to be aware of the riders available. For a custom term life insurance quote or if you have questions on the availability of policy riders, call MEG Financial today at (877) 583-3955.