Q

Q

Do riders increase the cost of life insurance?

A

A

Life insurance riders add additional benefits and features to your policy — some for free, and some at a cost.

Amanda Shih author photo

Amanda Shih

Published July 21, 2020

KEY TAKEAWAYS

  • Riders are a way to get additional life insurance coverage and customize your policy

  • Common riders are often included in standard life policies for free

  • The cost of life insurance riders varies depending on factors like the coverage amount and your insurer

Riders are additions to your life insurance policy that allow you to customize your coverage.

Some life insurance riders are included with your policy, some riders can be added to your policy for free, some you can add for an additional premium, and some riders require additional underwriting as well as an additional charge.

The types and prices of riders vary depending on your insurance company, your state, and your particular policy.

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Life insurance riders that are generally free

Some life insurance riders are common enough that most providers will include them in your policy automatically or won’t increase your premiums if you opt to add them.

Accelerated benefit rider

Also known as an accelerated death benefit or living benefits, this rider is already included in most life insurance policies. The accelerated benefit rider allows you to access your policy’s death benefit before you pass away. The exact circumstances that allow you to activate the rider will be defined in your policy, but generally those who qualify are diagnosed with a terminal illness, chronic illness, or critical illness.

The death benefit typically goes toward medical expenses, but your rider may also allow you to use the benefit for long-term care, like a nursing home, or for paying off debts.

Term conversion rider

Term conversion riders are included in most term life insurance policies. These riders allow you to convert your term policy into whole life insurance when your policy expires. This can be useful for older adults who want to maintain some life insurance coverage when their policy’s term is set to expire, but don’t want to go through underwriting again to get a brand new policy.

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Life insurance riders that require additional premiums

Some life insurance riders come with an added cost to your monthly premiums. The pricing may vary depending on your insurance company, your health, and the amount of coverage you buy through the rider.

Spousal rider

If you don’t want to buy a separate policy for your spouse, a spousal rider provides a death benefit to cover the loss of their income or contributions to your household, like childcare, in the event of their passing. It may cost less than a separate policy, but it may also provide less coverage.

Child rider

A child insurance rider provides a death benefit if your child passes away. While most children don’t need life insurance, a child insurance rider can cover funeral or medical costs for grieving parents or secure coverage for children with medical conditions that might make getting a policy more difficult when they’re older. Most child insurance riders can be converted into permanent insurance policies once the child enters adulthood.

Family income rider

A family income rider pays out part of the life insurance benefit in monthly installments, like an income. Some insurers also sell standalone family income policies if you want your entire death benefit handled this way. The pricing varies based on the amount of additional coverage you buy. If you think your beneficiary would be better off receiving some of the death benefit in smaller, predictable chunks rather than one large lump sum, this rider creates that payout structure.

Waiver of premium for disability rider

A waiver of premium for disability keeps your policy from lapsing if you become disabled and can no longer pay your premiums. Once you qualify, premium payments are withdrawn from your death benefit amount. Most insurers have a waiting period before you can qualify for this rider and require medical proof that you meet the definition of disability outlined in your policy.

Waiver of premium riders can be hard to qualify for, so we recommend long-term disability insurance for more robust disability coverage.

Long-term care rider

A long-term care rider allows you to use your death benefit to pay for assisted living medical care like a nursing home, private nurse, or memory care facility. To qualify you’ll need to prove that you need help to perform some activities of daily living, like eating or getting dressed. The rider does not cover medical expenses even though it is one of the costlier life insurance riders.

Return of premium rider

Also called a return of premium policy, this rider ensures that if you outlive your life insurance policy, you’ll be refunded any premiums that you paid toward the policy. The refund is tax-free and some people use it as a forced savings vehicle, but it might not be a worthwhile add on. Premiums are about 30% higher than for a standard term life policy and your premiums won’t earn interest like savings you put in a bank or investment account.

Accidental death benefit rider

A more limited version of a full accidental death and dismemberment (AD&D) policy, the accidental death benefit rider pays a death benefit if you’re seriously injured or killed in an accident. The rider is generally inexpensive to add to your policy, and is most helpful in the event you’re accidentally injured, since standard life policies also cover accidental death.

Disability income rider

Similar to the waiver of premium for disability rider, a disability income rider offers financial support if you become disabled. This rider pays a monthly stipend to supplement your income, similar to a long-term disability policy. You may need to provide additional medical information to qualify for the rider and determine how much you’ll pay.

A separate disability insurance policy will provide more coverage, but the rider is an option if you don’t want to buy a standalone policy.

Guaranteed insurability rider

During the life of your policy, you might need more coverage as you get married, grow your family, or buy property. A guaranteed insurability rider allows you to change your life insurance coverage after your policy is active without going through underwriting again. This rider is mainly available for permanent life insurance policies and increased coverage comes with increased premiums, but it can simplify your financial planning as you age.

The bottom line

Depending on what riders you add onto your policy, you may end up paying more on your monthly or annual premiums. Some riders, like a term conversion rider, are added onto your policy for free, but most come at an additional cost.

Whether you should buy life insurance riders and which riders are right for you largely depends on your specific financial and personal situation. If you don’t want to pay for a separate policy like AD&D or disability insurance, a rider is a way to get some of the same protections at a potentially lower cost. Or if you think your child will have difficulty getting life insurance coverage in the future, then a child rider may make sense for you.

It’s important to evaluate if a rider that doesn’t come with your policy is worth the additional cost. The best way to learn more about the availability and pricing of riders is by working with an insurance agent or broker. An expert can let you know what life insurance riders are available to you, help you decide if you should get them based on your individual circumstances, and quote rider costs based on your projected health classification.

Insurance Expert

Amanda Shih

Insurance Expert

Amanda Shih is an insurance editor at Policygenius in New York City. Previously, she worked in nonfiction book publishing and freelance content marketing. Amanda has a B.A. in literature and communication from New York University.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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