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Most life insurance policies have standard benefits. But depending on your insurer, you might be able to dress up your coverage with riders.
What is a life insurance rider?
A rider is an add-on that can customize or enhance your life insurance coverage. The options vary between insurers, and you’ll pay a fee to add most riders to your policy. Some riders are designed to pay your beneficiaries more money when you’re gone, and others offer benefits while you’re still alive — these are known as “living benefits riders.”
How can I find out how much riders cost?
When you’re applying for a policy, ask the insurer about any available riders and the costs of each. Typically, term conversion and critical illness are included, while you’ll pay a higher premium for most other add-ons.
11 of the most common life insurance riders
Life insurance companies offer a wide variety of riders. These are the most common ones you’ll come across:
1. Accelerated death benefit rider
If you’re diagnosed with a terminal illness and have six to 12 months left to live, this rider will pay out a portion of the death benefit. It’s paid out in either a lump sum or installments, depending on the provider, and the amount varies — though it can be as high 80% of the death benefit. While this rider is designed to help pay for end-of-life expenses like hospice care, you can use the money for anything you want.
2. Critical illness rider
Another “living benefits” rider, critical illness riders pay out a lump sum if you’re diagnosed with a critical illness covered by your policy. Depending on your provider, the covered illnesses might include heart disease, cancer, stroke, kidney failure and other conditions that lower your life expectancy.
These illnesses are often survivable, but the treatment costs add up quickly — and the critical illness rider can offset some of those expenses. When you die, your beneficiaries will receive the death benefit minus any money you spent on medical care.
You can also purchase a standalone critical illness insurance policy.
3. Disability income rider
If you opt into this rider, you’ll receive a monthly cash benefit if you become totally disabled and can’t work. The rider kicks in after a “waiting period,” which varies between providers and policies, but can last anywhere from a month to a year. Then, it pays a percentage of your policy’s value each month for the time you’re out of commission.
While this rider offers true income protection, there are a couple of caveats:
- The definition of “total disability” varies between insurers. Some carriers consider you to be fully disabled if you can’t do your own job, while others will pay out if you’re not able to do any job. Ask your insurer about their definition before choosing this rider.
- Your disability must be linked to a covered injury or accident. Read the fine print of your policy to find out the exclusions.
4. Waiver of premium rider
This rider waives your premiums for a set period of time if you become unemployed or fully disabled and can’t work. Some insurers roll both circumstances — unemployment and disability — into the same rider, while others offer separate riders.
To qualify for a disability waiver of premium, you must meet your insurer’s definition of disability. You’ll also need to provide proof of your disability, and be continuously disabled for three to six months before the rider kicks in. The finer details vary between providers, so read your policy documents carefully.
It’s a similar story for the unemployment waiver of premium. You’ll need to notify your insurer immediately, before you miss a payment, and prove that you’re actively looking for a job or receiving unemployment benefits.
5. Cost of living adjustment (COLA) rider
Worried about inflation? When you opt into this rider, your insurer might increase your policy’s death benefit to align with changes in the Consumer Price Index (CPI). The frequency varies, but insurers usually do this every year or so. The catch? If your benefit increases, so will your premiums. But a dip in the CPI won’t decrease the death benefit.
6. Accidental death benefit rider
This rider pays out up to double the death benefit to your beneficiaries if you die in an accident. The exact amount varies between insurers, as does the list of covered accidents. Accidental death benefit riders tend to be expensive, so they’re best suited to those with dangerous jobs or hobbies. Otherwise, they may not be worth the extra expense.
However, keep in mind your group life insurance might include this coverage. Life insurance policies offered through employers sometimes offer accidental death coverage at a much lower cost than if you purchased a standalone policy. Be sure to ask your employer if this benefit comes with your workplace’s policy.
7. Guaranteed insurability rider
With a guaranteed insurability rider, you can boost your coverage at specific times during your policy, like every five or 10 years. You won’t need to complete another health questionnaire or medical exam. This rider applies to permanent policies such as whole life, and there are caps on the dollar amount of coverage you can add to your policy.
Guaranteed insurability riders are helpful for those who think their financial obligations may increase over time, like young couples who are planning to buy a house and have children.
8. Child term rider
Also known as a child protection rider, this pays out a death benefit if your child dies. This rider usually costs less than an additional $10 a month, and covers multiple children. Typically, you can add a child rider to your policy from the time your little one is two weeks old to age 18. Coverage usually ends when the child turns 25 or gets married. At that point, the rider can be converted to a permanent policy — which is particularly useful if the child has a medical condition that might otherwise disqualify them for coverage.
Though this rider is cheap, it’s not always necessary. One reason to consider adding on this rider is to cover the costs of a funeral.
9. Return of premium (ROP) rider
Applied to term life insurance, this rider reimburses you for any premiums paid if you outlive your policy. While this rider refunds the money you paid (minus any admin fees and the cost of other riders), it can raise your premium by more than triple. You won’t earn interest on the reimbursed money, either.
Term life insurance is marketed as the most affordable policy, so if keeping your premium low is a priority, weigh up whether it’s worth adding this feature to your coverage.
10. Long-term care (LTC) rider
Offered with some permanent policies, a long-term care rider steps in when you’re chronically ill and can’t take care of yourself. To activate this benefit, you’ll need to prove that you can no longer perform two of the six Activities for Daily Living (ADLs) on your own:
- Caring for incontinence
- Toileting — i.e. getting on or off the toilet
- Transferring — i.e. getting in and out of a bed or chair
Like the critical illness rider, this lets you pull money from the death benefit as you need it. You can then use the cash to pay for a nursing home or other care expenses.
Long-term care insurance is sold as a standalone policy, too.
11. Term conversion rider
This rider allows you to convert your term life insurance policy to a permanent policy within a certain time frame — usually in the first five years of your policy or before your 60th, 65th or 70th birthday. You won’t need to take a medical exam, but you will pay a higher premium for the permanent policy.
Compare life insurance companies
Riders give you a chance to customize your life insurance coverage to suit your needs. Most providers offer a range of riders to cater to their customers. But before you click “add to policy,” remember that riders usually come at a cost — and you may not actually need them.
To find out which riders you can unlock, compare life insurance providers and policies.
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