Term life insurance is a pretty simple product. Sure, the shopping process can get a little complicated, especially if your health situation is a little complicated, but at the end of the day, term life insurance is made up of three basic components: your coverage (also known as your death benefit), your term (how long the policy lasts), and your premium (how much you’re paying for it). If you die, they pay your beneficiaries, and that’s pretty much it. There’s very little fine print, especially when you compare term to its main competitor, whole life insurance.
But term life insurance can also be modified to provide additional coverage or to provide flexibility to your coverage, and it’s actually pretty easy to do it. All you need to do is add something called a "rider" to your policy. Riders are like additional mini-contracts that you add on to your life insurance policy. They can do a number of different things – everything from adding coverage for your children to changing the way the policy works.
Our life insurance agents talk to a lot of shoppers every day, so they have a pretty good understanding of what types of life insurance riders people have heard about and – more importantly – want on their policies. Here’s a rundown of the three most common life insurance riders that our customers want.
What does it do?Long-term care riders allow you to take money out of your death benefit in order to pay for long-term care – i.e., a nursing home or a private nurse.
Long-term care riders and accelerated death benefit riders, which we’ll talk about next, are sometimes called the same thing at life insurance companies. However, they are two distinct products with different qualifications, so make sure you understand what you’re paying for.
Typically, long-term care riders are triggered by chronic illnesses that take away your ability to take care of yourself. Accelerated death benefit riders are usually triggered by a terminal illness.
Why do people want it?Primarily because compared to a standalone long-term care insurance policy, a rider may be cheaper and easier to qualify for. A lot of our customers have older parents and are thinking about long-term care insurance for both their parents and themselves. Long-term care riders are a cheaper way to get some form of long-term care coverage.
Almost 70% of people turning 65 this year will need long-term care at some point before they die. But it’s not just an issue for the elderly – 37% of Americans in need of long-term care are under the age of 64.
If you’re worried at all about the economic effect that providing long-term care for you might have on your family, ask your agent about a long-term care rider.
How much will it cost me?The long-term care rider is the most complicated rider to price out because it’s basically like another insurance product on top of your life insurance policy. This also makes it one of the most expensive riders – you can expect it to cost around $600 to $800 per year, or between $50 and $70 per month.
What does it do?Similarly to a long-term care rider, the accelerated death benefit rider (sometimes called an acceleration of death benefit rider) allows you to take money out of your death benefit in order to pay for medical expenses. In this case, it allows you to pay for medical expenses related to a terminal illness – for example, a terminal case of cancer.
Why do people want it?Most of us have known someone who died too young from cancer or another terminal disease. Fighting these diseases is expensive, and oftentimes the odds are against us. An accelerated death benefit rider is an easy way to tap into a large fund of money in the event that you’re diagnosed with a terminal illness. This helps protect your other assets and stops your family from going into medical debt.
How much will it cost me?Luckily, many life insurance policies have this rider built-in to their base policies – most of the time, you have just have to opt-in. You should definitely ask your agent to make sure that your policy has this rider. It’s a great deal for consumers and it adds another layer of protection to your life insurance policy.
What does it do?The disability waiver of premium rider stipulates that if you become disabled – meaning you can’t work for a paycheck because of a medical condition – you don’t have to pay your life insurance premiums until the disability ends.
Be careful with this rider, however: every life insurance company has their own idea of what counts as a disability, so make sure to read the fine print. Your agent can help you interpret the legalese and compare policies.
Why do people want it?About 25% of today’s twenty-year-olds will experience a disability before they retire – and your individual chance of experiencing a disability may be even higher. A common misconception is that disability can only happen because of a workplace accident, but most disabilities are actually the result of medical conditions like cancer or chronic back pain.
A disability waiver of premium rider allows you to keep your life insurance policy without worrying about how you’re going to pay for it while you’re out of work. It’s only one piece of the puzzle, however – a long-term disability insurance policy will do more to protect your income than a simple rider.
How much will it cost me?Disability waiver of premium riders typically cost $10 to $20 per month extra on top of your regular premium. Your agent can help you price out your options at various companies.
There are many life insurance riders that we didn’t cover here. You can check out our guide to the six life insurance riders you may need, plus our thoughts on child riders and more general information on riders.
You can also ask our life insurance agents any questions you have about riders – they’re qualified experts on policies from a wide variety of companies and can help point you in the right direction.
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