All life insurance companies offer add-ons or “riders” to their policies. Some of these riders can be worth the additional premium, depending on your unique situation. I will cover the most common and important riders to consider. The types of riders vary among the carriers and the life insurance products they offer.
Waiver of Premium
This rider is the one most frequently added to life insurance policies. The Waiver of Premium rider comes into play in the event of a disability. If the insured person becomes disabled, then he/she is no longer required to pay the life insurance premium, for the duration of the disability. This rider can make sense if the insured does not have a strong disability insurance policy. Even if they do, it is extra protection that doesn’t cost a lot. The additional premium varies depending on the carrier.
The disability income rider will pay out a monthly benefit in the event of a disability. This rider can be good if the insured has a difficult time obtaining quality disability insurance due their type of work. For most people, I advise them not to add this rider. It usually makes sense to buy a stand-alone disability policy that has a strong definition of “disability” — the definitions vary widely. These riders are not often found with standard low-cost term carriers. It is important to ask lots of questions when considering this rider. Make sure your advisor has a solid understanding of all the policy features and provisions of disability insurance.
Many carriers will offer add-on coverage for children up to the age of 18. Typically, the life insurance for children is offered in units of $1000, up to $10,000 per child. Several carriers offer this rider at the same price whether you have one child or seven! So, this is a smart rider to choose if you have a big family. Also, this can be a good rider to choose if a child has a chronic medical condition. Even though it is a small amount of coverage, the medical underwriting is limited, so it can help a child who might have difficulty obtaining life insurance as an adult. In most cases the policy will have an option to convert to a separate policy when the child turns 18.
This type of rider has been dropped by many carriers in recent years. There are still a handful of carriers that offer an Accidental Death benefit rider, however, the cost has increased significantly. This rider will only pay in the event of an accidental death, and some carriers can be quite narrow in their definition of accidental death. Usually, this rider will double the death benefit if the insured dies to to an accident. It is especially important to read the fine print when considering this rider.
This rider often comes as a standard policy provision — not a rider. Some carriers offer two nearly identical term products: One product with a conversion provision and one without one. This is an important consideration. Is it worth the savings of $5 per month (as an example) to buy a policy without this provision? A knowledgeable agent can help you make this decision.
Most carriers will allow you to convert your term policy to a permanent policy during the full term of the policy. This provision is nice since it guarantees that you can convert to a permanent policy regardless of your health. If your health deteriorates and you think you might want a permanent policy, then term conversion can be very useful. Keep in mind, some term products will only allow you to convert during the first 5 or 10 years of your policy. Also, know that the permanent products available for conversion are not always the best performing permanent products. So, it is wise to ask about the details of this provision.
Guaranteed Insurability Rider
Similar to the Term Conversion rider, this rider helps protect against a decline in health. If you think you will want to purchase additional life insurance in the future, then this product will allow you to purchase the additional coverage without a paramed exam or any medical underwriting. This rider can be a smart move if you are fairly certain your income will increase and/or your need for additional coverage will increase also.
In Summary …. The riders listed here are the most common ones available, but not an exhaustive list. It is important to discuss these options with an experienced life insurance agent. Don’t rush through these options without asking questions and don’t select a rider just because an agent recommends it. Find out why it would make sense for you!
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