Life insurance riders are optional, additional terms you can use to enhance the base coverage of your life insurance policy. Riders are generally chosen when you apply for your life insurance policy, and they go in-force at the same time your policy does.
Riders cover a wide range of topics like converting your term policy to a whole life policy, or paying for your premiums if you become disabled. Some riders, like the accelerated death benefit, are often offered free of charge while others can substantially increase your insurance premiums.
Some of the most common riders are outlined below.
Accelerated Death Benefit
What Is It?
The accelerated death benefit rider provides early access to your death benefit in the event that you are diagnosed with a terminal illness. Most insurance companies dictate that your prognosis must be short – 6 to 24 months to live.
This policy allows you to access a large portion (or all) of your death benefit while you are still alive, which is why it’s often called a living benefit rider. The amount that your beneficiary receives after you pass is reduced by the amount that you used, but that money has generally already been put to good use.
Why Would I Need it?
This rider helps pay for end-of-life costs like hospice care or an in-home nurse. End-of-life care is costly and this rider takes the burden off of you or your family to pay for these costs. This rider also allows you to take care of arrangements for after your death, so your family doesn’t have to.
Long Term Care (LTC) Rider
What Is It?
Like the accelerated benefits rider, the LTC rider allows the insured to use a portion of their life insurance benefit while they are still living. While the accelerated death benefit is triggered by a terminal illness, the LTC rider is triggered by a condition that renders you unable to care for yourself.
The benefits from this rider are used to pay for care costs like an at-home nurse or a care facility.
Why Would I Need it?
Long term care is costly and can often be a burden on those who are ill and their family. This rider allows you to avoid the strain that comes from your care needs.
Guaranteed Insurability Rider
What is it?
The guaranteed insurability rider allows you to purchase additional life insurance at a later date, with no additional underwriting needed. The times that you are able to purchase more insurance are generally limited to a certain number of years, or after specific lifestyle events like the birth of a child or getting married.
Why would I need it?
This rider is useful because your need for life insurance can increase as you age, and sometimes it’s harder to get the coverage you need if your health has declined. The guaranteed insurability rider makes it so you are able to obtain more coverage even after a diagnosis that would otherwise disqualify you.
Term Conversion Rider
What Is It?
The term conversion rider allows you to convert a term life insurance policy into a permanent or whole life insurance policy. This rider usually only allows you to convert your policy during the conversion period – that takes place a few years after your policy goes in-force and ends near the end of your policy term.
It doesn’t usually provide a higher death benefit, but it does allow you to turn your term policy into something that you can keep after it expires. This rider allows you to convert your policy without additional medical underwriting, but your premiums will go up after the conversion.
Why Would I Need It?
Often times the expectation of a term life insurance policy is that your need for life insurance is going to be less at the end of its term – either due to dependents no longer relying on your income, or paying off your house or other debt. Sometimes your needs change though, and the term conversion rider allows you to keep your life insurance policy.
Because this rider doesn’t require any additional underwriting, you are able to extend your insurance even if you have been diagnosed with a condition that would generally have you denied.
What Other Riders Are Available?
The riders we have covered are some of the most common, but they only scratch the surface of what is available. Other available riders can cover topics like accidental death, loss of a limb, or provide a death benefit in the event your spouse or child passes away.
Adding riders to your life insurance policy can feel like a complex process and often times there is a lot of fine print to try to understand. If you have any questions about life insurance riders or if a certain rider is right for you, don’t hesitate to contact us. We’re happy to talk through the types of riders available, review your existing coverage, or help you find a policy that is right for you.