What is a Life Insurance Rider?

What are life insurance riders?

Whether you have a term or whole life insurance policy, you can customize your coverage options via add-ons called riders. Life insurance riders are comparable to auto or home insurance endorsements in the sense that they are optional additional coverages you may include in your policy for extra coverage for specific circumstances.

Let’s take a look at the different types of life insurance riders and why you might consider adding one to your policy.

Types of life insurance riders

Adding riders to your life insurance policy can be useful as they allow you to tailor your policy and gain supplemental coverage that is not typically covered under a standard policy. Just as home and auto insurance endorsements cost more to add on to your policy, so do life insurance riders. It’s important to assess your specific needs and financial means before deciding which types of riders might be right for you.

Below you'll find a list of some of the most commonly available life insurance riders.

Waiver of premium rider

This rider allows you to waive your premiums in the event you are unable to pay them due to a covered illness or injury that puts you out of work. Covered illnesses may include loss of limb, paralysis, spinal trauma or loss of vision. With this rider, you may waive your premium payments until such time you are able to return to work and make payments again. Waiver of premium riders are among the most commonly used riders in life insurance and may even be included in some standard policy provisions. The qualifications of disability that trigger this rider vary by insurer.

Accelerated death benefit rider

This rider is often associated with a few other names, including terminal illness rider and critical illness rider. This type of add-on serves as financial protection while you’re still alive (this is sometimes referred to as a living benefit). Funds are taken from your life insurance death benefit to help with expenses in unexpected circumstances, such as terminal illness. 

Accelerated death benefits are meant to be paid out in instances where a diagnosed illness indicates the policyholder doesn't have much time left. In order to be eligible for a payout, a doctor must conduct a medical exam and confirm that you have 6-12 months to live. These riders are meant to cover end-of-life care like nursing home costs,  but it is not required that you put this payout towards that expense. You may also use an accelerated death benefit rider for critical illness if you wish to take an early payout in the event you are diagnosed with a chronic illness that requires continuous care.

Long-term care rider

Similar to the chronic illness rider, the long-term care (LTC) rider is meant to provide additional benefits for long-term care expenses. Benefits are activated when a medical condition prohibits you from being able to perform two of six activities for daily living (eating, bathing, dressing, toileting, transferring and continence). 

Return of premium rider

This rider ensures you receive a refund for premiums you paid if you outlive the terms of the policy. This rider is specifically tied to term life insurance policies. It is not often recommended to consider this rider as the additional costs often outweigh the benefits. Monthly premiums are high with this rider and though you get cash back at the end of the term, you cannot recoup administrative fees and the money you spend on this rider does not accrue interest. 

Family insurance riders

There are two types of family insurance riders: spousal and child. Spousal insurance riders allow you to receive a death benefit payout if your spouse dies. This rider covers extra childcare costs if you lose your spouse’s caregiving abilities or income, even if he or she wasn’t the primary breadwinner. This is beneficial to some as spousal riders are less expensive than a separate policy for your spouse, though your premium will increase with this option. 

Child insurance riders are a low-cost option that pays out the death benefit if your child passes. This is generally available for term policies, offering a limited amount of coverage and is meant to cover funeral expenses in the event of a child’s unexpected death. 

Accidental death and dismemberment rider

The accidental death benefit rider is often added for policyholders who lead a particularly risky lifestyle or who have dangerous jobs or hobbies. It pays out in case the policyholder dies unexpectedly from an accident or loses a limb or digit in an accident. This endorsement does increase your premium and is often not necessary for most people to include. 

Guaranteed insurability rider

Usually tacked onto permanent life insurance products like universal life or whole life policies, the guaranteed insurability rider allows you to increase your policy's death benefit at specified future dates, like reaching a specific age or at other major life events. The draw to this rider is that you do not need to submit a medical exam or provide proof of insurability, though you will have to pay more for the increase in coverage. 

Is adding a life insurance rider worth it? 

As with most insurance necessities, the decision to include certain life insurance coverages depends on your unique situation. For people with high-risk jobs or hobbies, the accidental death rider might be an option worth exploring. Family insurance riders might be worth it for policyholders whose spouses do not have life insurance or cannot afford a policy of their own. With life insurance riders, it is best to assess whether the protection the rider provides is worth the extra premium cost. 

If you’re considering adding life insurance riders to your policy, it is important to examine the terms of the agreement and understand the qualifications that need to be met to receive compensation from the life insurance company. The best way to determine if life insurance riders are right for you is to contact your insurance agent to discuss your options.