If you own or are interested in purchasing a life insurance policy, you may have come across life insurance riders. But what is a rider in life insurance? How does a rider work?
Insurance policies in and of themselves can be confusing, especially if you’re purchasing a policy for the first time or changing your provider. Riders add an extra layer of complexity because they can vary so much, depending on your needs.
Here’s a general overview of how riders work with life insurance.
What Is a Rider in Life Insurance?
Life insurance is generally a policy that helps protect your loved ones after you die. A life insurance rider is basically an “add-on” to your policy that can provide additional protection or extra coverage for you and your heirs.
You should consider adding a rider if your standard life insurance policy does not meet all of your needs. You might think of an insurance rider as similar to the optional features available when you purchase a new car.
Suppose that the car itself is the insurance policy in this analogy. Life insurance riders are the optional features you can add to your purchase, such as power windows, heated seats, sensors, or navigation systems.
These features can be quite useful, but you may not need all of them — and you can save money by choosing only the ones you need.
Types of Life Insurance Riders
There’s a different type of life insurance rider for practically every need under the sun. Some common riders include the following:
Life Benefit Rider
The life benefit rider is sometimes called the accelerated death benefit life insurance rider. This type of rider allows you to take advantage of your coverage if you become seriously ill but have not passed yet.
Terminal Illness vs. Chronic Illness
Life benefit riders vary, depending on whether you are diagnosed with a terminal or chronic illness.
An illness is terminal if a doctor has told you that you have a year or less to live.
In contrast, chronic illnesses are long-term conditions that make it difficult to perform daily activities like eating, dressing, toileting, and bathing.
Suppose that you have been diagnosed with a serious illness. If your policy includes a terminal or chronic illness rider, you can submit a claim to your insurance carrier for partial benefits while you are still living.
Waiver of Premium Rider
This type of life insurance rider enables you to stop paying life insurance premiums in the event that you become disabled.
Providers have specific definitions of disabilities, so consult a well-informed agent to determine what qualifies as a disability under this rider.
Long-Term Care Insurance Rider
A long-term care insurance rider allows you to get money from your life insurance policy in the event that something happens to you that results in the need for long-term care.
This rider is popular because it is generally not very expensive and could prove very valuable if you end up needing it.
Term Life Insurance Conversion Rider
With this type of life insurance rider, you can change a term policy into a permanent one. Term life insurance conversion riders are especially useful if your health worsens and you want the security of permanent coverage.
How Much Do Life Insurance Riders Cost?
The amount that each life insurance rider costs will depend on the rider.
For example, a child life insurance rider, which covers burial expenses for children, is generally quite inexpensive. This is because child mortality rates are statistically lower than adult mortality.
Term life insurance conversion riders are typically much cheaper than standard life insurance policies. That’s why they are appealing to individuals who start their life insurance policies in relatively good health.
Advantages and Disadvantages of Life Insurance Riders
There are numerous advantages to life insurance riders.
Riders offer more peace of mind so that you can navigate life knowing you have the coverage you need. Life insurance riders can, in many cases, act as a security blanket to help support you in the event of unfortunate and unexpected life circumstances.
However, there is a trade-off when adding a rider to your life insurance policy. The main issue is that if you take advantage of a life benefit rider, your beneficiaries will only receive the remaining, or unclaimed, amount of your policy.
Are Life Insurance Riders Worth It?
There’s no easy answer to whether a life insurance rider is worthwhile for you, given the variety of life insurance riders available and given that everyone’s situation is different.
Some life insurance riders are more worthwhile than others. For example, if a term conversion rider is included in your policy premium, it may be beneficial to take advantage of it.
Disability insurance riders are trickier since the definition of disability varies widely per insurer and policy. The best way to determine whether a life insurance rider is worthwhile is to consult with an insurance representative who is an expert on life insurance coverage.
How to Add Life Insurance Riders to Your Insurance Policy
Here is an overview of how to add one or multiple life insurance riders to your insurance policy, whether it’s a new or existing policy.
If You Have an Existing Policy
Unfortunately, most providers do not allow you to add insurance riders to an already active life insurance policy. This can feel frustrating if your life circumstances have changed and you now want to have certain riders.
In this case, speak to your insurance agent about what steps you can take to find a life insurance policy that meets all of your needs. Another option is switching to a different insurer with the right life insurance riders.
If You’re Getting a New Policy
If you’re in the process of purchasing a new life insurance policy, then adding riders will be much simpler for you.
Your insurance agent can help you identify which riders make the most sense for your policy, lifestyle, and concerns so that you have the right coverage you need.
Getting the Right Life Insurance Rider
Purchasing the right life insurance rider doesn’t have to be a daunting task. With the right insurance agent, this process can be smooth and straightforward, giving you a greater sense of safety and security.