Table of contents
Life insurance riders are optional benefits that you can buy and add to your base policy. They allow you to customize your policy to your liking.
But with so many riders to choose from, how do you know which one to get?
In this post, we uncover the most common life insurance riders and explain their pros and cons. By the end, you’ll know which ones are worth it and which ones you should avoid.
Types Of Life Insurance Riders
1. Guaranteed insurability rider
The guaranteed insurability option is one of the most important riders. It lets you buy more insurance in the future without having to qualify for it medically.
Essentially, it locks in your good health now so that even if it declines, you can buy more coverage later when you need it most.
You should consider this rider if you don’t have a significant insurance need now but foresee having one in the future when you have more financial obligations. That usually happens when an important life event occurs—for example, getting married, having children, and buying a home.
2. Term insurance rider
The term insurance rider adds a layer of term insurance coverage to your policy. For example, if your base policy is a term-30, you can add a term-20 rider so that you have different coverage amounts over 20 and 30 years.
You can also add a term rider to a whole life insurance policy. In doing so, you get permanent insurance for covering final expenses. It also provides term insurance for short-term needs like income replacement.
If you want to ladder your insurance coverage to save money, you have to use term insurance riders.
3. Accidental death rider
If you die from an accident, the insurance company will pay out an extra death benefit with this rider. You can choose how much it pays. The higher the accidental death benefit, the more expensive the rider.
Most people won’t need this rider because the odds of dying from an accident are very low. However, if you have dangerous hobbies or work a hazardous occupation, you can consider this rider for a few dollars extra.
Even then, you’ll want to ask yourself if your family needs an extra death benefit if you die from an accident. Also, insurance companies have different interpretations of an accident. What you think is an accidental death might be excluded in the policy.
4. Disability waiver of premium rider
The disability waiver of premium rider does precisely that—it waives your premium if you can’t work because of a disability. The rider comes in handy when your income stops unexpectedly because of a disability.
However, the better option is a standalone disability insurance policy. It provides more robust protection and pays you a benefit based on the income you lost while disabled.
If you want to get the disability waiver of premium rider, you’ll want to determine the insurance company’s definition of a disability. It varies from one insurer to another, making it harder to qualify for benefits for some policies.
5. Spousal term rider
A spousal term rider lets you purchase term insurance on your spouse or common-law partner. If your spouse passes away, it will pay you a small death benefit.
While it’s better than no insurance, the coverage you can buy for your spouse is minimal. For that reason, your spouse should buy their own term insurance.
In addition, if you use a rider, your spouse’s coverage will end when you die or if you separate. A separate policy on your spouse’s life will be much more flexible and futureproof.
6. Child term rider
A child term insurance rider covers your child (or children, if you have more than one) until they reach adulthood. Because children don’t need much life insurance, this rider provides a cost-effective way to cover funeral expenses and medical bills.
One of the benefits of the child term rider is that the cost is the same no matter how many children you have. So the more children you have, the lower the price per child.
Also, when your children reach the age of majority, they can convert the coverage into their own term insurance policy. Most importantly, they can do it without providing evidence of insurability. So even if their health is poor, they will be able to exercise this option.
7. Critical illness insurance rider
The critical illness insurance rider provides a benefit if you’re diagnosed with one of the covered critical illnesses. The most common conditions are heart attack, life-threatening cancer, and stroke. Because of the severity of these illnesses, you can use the lump sum benefit to focus on recovery. It lets you take time off work without worrying about your finances.
It’s important to note that the critical illness benefit is separate from the death benefit. If you receive the critical illness benefit, the payout won’t reduce your death benefit.
Frequently Asked Questions
What are the benefits of life insurance riders?
Life insurance riders let you customize your policy to your liking. With a rider, you can pay a small additional premium to ensure you and your family are fully protected.
What are the disadvantages of life insurance riders?
Although some riders give you excellent benefits, some are unnecessary and expensive. Adding the wrong riders to your policy can significantly impact your budget while not providing much use at all.
Can you add a rider to an existing policy?
If you already bought life insurance without any riders, you might be able to add them later. While some insurers will let you add them, others might not be so lenient. You’ll need to check with your life insurance agent which riders you can add and how much they will cost.
Can you remove a rider from an existing policy?
Regret buying a rider? Don’t worry; it’s not hard to remove it from your policy. All you need to do is contact your life insurance agent, who will send you the form to remove the rider.
Keep in mind that in some cases, you can’t undo this if you change your mind. So you’ll want to be sure before going through with this step.
Is there a return of premium rider?
There is no return of premium rider with life insurance. This is more commonly found in disability and critical illness insurance policies, where you get some or all your premiums back if you don’t make a claim.
Are life insurance riders worth it?
To answer that question, you have to weigh the benefits against the cost. Some are essential to your policy, while others cost more than they’re worth.
While it’s nice to have all the riders on this list, it becomes a burden on your finance if you add them all. Instead, pick a few that you think you need and find out how much they cost. Next, have a discussion with your loved ones about them. By doing this exercise, you can determine if the rider is worth it.
Final Thoughts
Life insurance riders are additional coverages that you can purchase. You can customize your life insurance policy with these optional additions to provide more tailored coverage.
You’ll want to consider the benefits and drawbacks before making any decisions about purchasing them.
Be sure to speak with us today if you have questions about what life insurance rider would work best for you!
While we make every effort to keep our site updated, please be aware that timely information on this page, such as quote estimates, or pertinent details about companies, may only be accurate as of its last edit day. Brian So Insurance and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser. This post is a brief summary for indicative purposes only. It does not include all terms, conditions, limitations, exclusions, and other provisions of the policies described, some of which may be material to the policy selection. Please refer to the actual policy documents for complete details which can be provided upon request. In case of any discrepancy, the language in the actual policy documents will prevail. A.M. Best financial strength ratings displayed are not a warranty of a company’s financial strength and ability to meet its obligations to policyholders.
