Life insurance riders are beneficial to many, but they aren’t necessary for every single policy
There are so many reasons why people need life insurance. For example, if you have children, outstanding debts, or are taking care of your aging parents, you should absolutely have a life insurance policy to protect you and your loved ones. While you’re searching for a life insurance policy, there is a good chance that you will encounter insurance policy riders. Riders are benefits that let you customize your insurance policy with specific qualifications. Riders generally improve your coverage depending on the type of coverage you require, but they come at an additional cost as well.
In this article, we’re discussing everything you need to know about life insurance riders, the different types, and whether or not an insurance rider is the right choice for you and your loved ones. However, before we get into the most common types of life insurance riders and what they do, we need to go over the basic types of life insurance and ways to secure coverage. Ready to get started? Let’s go!
Things You Need to Know Before Purchasing a Life Insurance Policy
Before we talk about the different riders you can consider, we need to talk about the different types of insurance policies
Don’t get overwhelmed by the amount of life insurance options.
As you browse for different insurance policies, providers, and riders, you’ll probably notice that getting life insurance isn’t the most straightforward process. The amount of options you have with just a simple online search can make the process difficult. That’s why we are taking a moment to break down the different insurance types you’ll encounter and what they entail.
Term life insurance is a type of insurance that protects you and your loved ones for a designated period of time. Whole life insurance—on the other hand—protects you for your whole life and guarantees a payout as long as you pay your monthly premium. The trade off is that whole life insurance tends to be much more expensive than term life insurance.
Plus, there are many people who no longer need life insurance coverage as they age. These are people who have grown children out of the house, a healthy savings, retirement plan, and no outstanding debts. In some cases, a whole life insurance policy is unnecessarily expensive.
No matter which type of policy you choose, you will have to undergo the underwriting process. Underwriting involves taking all of your application information including your questionnaire, medical records, and results of your medical exam. Due to the medical exam, the underwriting process can take up to two months. There are many people who are able to qualify with no medical exam as a way to expedite the underwriting process. Getting life insurance without a medical exam is increasingly popular as there is not too much of a cost differential and many people just don’t have the time to wait two months for approval. That said, getting life insurance without a medical exam does tend to be more expensive than if you choose to take an exam. These kinds of no medical exam life insurance policies are especially handy for people who need life insurance quickly—like people who are expecting children or taking out large loans.
Now that we know the basics about types of policies and the underwriting process, let’s learn about how riders affect your policy and your monthly premiums.
What Are the Different Types of Life Insurance Riders and How Do They Work?
Each insurance rider is designed to let you customize your policy in a way that best protects your family’s future
Do your research before deciding on an insurance policy and associated riders.
Riders can be very helpful for some people and less so for others. Make sure you are getting the right coverage by reading about the different types of life insurance riders we’ve listed below.
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Accidental Death Rider
The first type of life insurance rider we’ll be discussing is the accidental death rider. With an accidental death rider, your loved ones will receive an additional sum of money should you die in an accident. In most cases—if you meet the qualifications for accidental death—the payout amount is doubled. This type of rider is a good idea if you are the primary provider for your family.
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Guaranteed Insurability Rider
When you get a standard life insurance policy, you have to undergo a medical exam as we’ve discussed before. When you purchase a guaranteed insurability rider in addition to your life insurance policy, you are exempt from the medical exam should you want to change your policy amount. So, if you need to increase your policy amount due to a major life change, you can do so without undergoing a secondary medical exam.
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Waiver of Premium
Life insurance is designed to protect your loved ones after you’re gone, but there are riders available that protect you while you’re alive. One of these is the waiver of premium. When you choose to add a waiver of premium rider to your policy, you are protected in the event of an injury, illness, or disability that prevents you from working. Should this happen, you no longer are required to pay your premium and are allowed to maintain your life insurance coverage.
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Accelerated Death Benefit
Accelerated death benefit is another type of rider that provides additional protections while you’re alive. In the event that you are diagnosed with a terminal illness that will significantly limit your lifespan, you will be able to use the money from your policy while you’re alive. Most often, these funds go toward medical care and other end of life considerations. If you are considering purchasing an accelerated death benefit rider, then you should take the time to go over the specifics of what your insurance provider defines as a terminal illness.
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Child Term Rider
A child term rider is a very specific form of life insurance rider designed to protect you in the case of the death of a child. As a rider on an existing insurance policy, the child term rider provides a payout under the condition that the child dies before a certain age. When the child reaches a certain age, the rider is then converted into a permanent life insurance policy. In many cases, the converted policy amount is much larger than the rider and does not require a medical exam.
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Long Term Care Rider
When you purchase a long term care rider, you are purchasing protection should you need assisted living services or another type of long term care. There are also types of long term care insurance that you can purchase separately. Your long term care rider will provide you with a monthly payout that you can use to pay for care.
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Return of Premium
In order to maintain coverage with any type of life insurance policy, you need to pay your monthly premiums. When you purchase a return of premium rider, you can get your monthly premiums paid back to you should you outlive your life insurance policy. Should you pass away during the term, your loved ones will receive your policy payout in addition to the sum you paid toward your return of premium rider.
Do I Need a Life Insurance Rider?
Though not everyone needs a life insurance rider, they are helpful to many
Life insurance riders aren’t for everyone.
With all of these different types of riders, getting the right kind of insurance coverage probably seems confusing. However, these days it is easier than ever to compare different policy types and find the coverage you need. There are a lot of handy tools you can find online that let you compare quotes and weigh the pros and cons of each policy type. You can also reach out to an insurance agent if you feel you need extra advice. Ultimately, the decision to add riders to your insurance policy is up to you and your coverage needs. While some riders may be super valuable to some, others are unnecessary. So, by evaluating your needs and doing your research, you can decide whether or not you want to purchase a rider to expand your coverage.
