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What is a guaranteed insurability rider?

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The guaranteed insurability rider allows you to increase your life insurance coverage during specified periods without going through underwriting again.

Amanda Shih author photo

Amanda Shih

Published November 5, 2020

KEY TAKEAWAYS

  • This type of rider is most common in permanent life insurance policies, such as whole life insurance

  • The rider allows you to increase your life insurance benefit on a recurring basis or due to a life event without a new medical exam

  • Guaranteed insurability is useful if you have an illness that could worsen over time and cause an increase in premiums

  • Most people will spend less by buying term life insurance, even if you eventually need a higher death benefit

When you buy a life insurance policy, your life insurance company may offer you additions to your policy called riders. Riders allow you to customize or add to your coverage.

A guaranteed insurability rider, sometimes known as a guaranteed purchase option rider, gives you the ability to increase your policy’s death benefit without going through a new medical screening, netting you more affordable pricing.

The guaranteed insurability rider comes at a low additional cost, but it isn't offered for every life insurance policy. It’s most commonly seen in whole life insurance. Because of the high premiums of whole life, most people will be better off with more affordable term life insurance policies. However, guaranteed insurability is especially useful if you or your child have a medical condition or family health history that could worsen and significantly impact insurance premiums with age.

How guaranteed insurability riders work

When you buy a new life insurance policy you go through the underwriting process, during which the insurance company measures the risk of insuring you and sets your premiums. Usually, if you want to increase your coverage, either by buying a new policy or by increasing coverage for your existing policy, you need to go through underwriting again and your premiums may be higher due to changes in your age or health.

Since the guaranteed insurability rider lets you buy additional life insurance based on the information from your original underwriting report, your premiums will go up based on your coverage increase, but not due to any health or lifestyle changes. Each time you’re eligible to increase your coverage you are limited to a minimum and maximum increase, which varies by provider but is commonly $25,000-125,000. Some insurers might set a maximum of double your current death benefit amount instead.

When you can purchase new coverage (the option date) also varies by insurer, but it is typically every three or five years from the day your policy went in force and within 30-90 days of a major life event, such as a marriage.

The cost of adding a guaranteed insurability rider varies by insurer, but can be as low as $3-5 per month.

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Who needs a guaranteed insurability rider?

If you’re relatively healthy and don’t have a chronic illness or a family history of serious health issues that could complicate your approval for term life insurance, you probably don’t need a guaranteed insurability rider.

Even if your parents bought a whole life policy for you as a child, “a relatively healthy adult will be able to buy a term policy that's lower in cost and likely be able to purchase a much larger amount of life insurance for the same premiums they’d be paying for whole life policy,” says Patrick Hanzel, Policygenius’ Advanced Planning Specialist and Certified Financial Planner.

However, you may benefit from a guaranteed insurability rider if you:

  • Have a medical condition that may worsen significantly as you age
  • Have a family history of serious illness that could affect you before age 45
  • Want a permanent policy and plan to increase your coverage in the future

In any of these scenarios, the rider could save you money should your health become much worse than it was during the initial underwriting process. If you have a child with a chronic illness or similar lifelong concern, you may also consider buying them a policy with a guaranteed insurability rider to lock them into more preferential premiums while they’re younger and comparatively healthier.

Note that children without health concerns will save more money in adulthood with term life insurance assuming they become relatively healthy adults. And you can’t increase your coverage with the guaranteed insurability rider after reaching a certain age, commonly around 45 years old.

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Alternatives to a guaranteed insurability rider

Not everybody can add a guaranteed insurability rider to their policy, but there are alternatives. Some may even be more affordable, depending on what kind of coverage you need.

Term life insurance

Whole life insurance, for which guaranteed insurability riders are more common, is five to 15 times more expensive than term life insurance, putting you at risk of a policy lapse if you can’t afford the premiums. It might be more cost-effective to buy term life insurance without a guaranteed insurability rider, even if you have a chronic illness or other health concerns, if you choose an insurer that’s more flexible toward your diagnosis.

A term policy is also better if your health could improve over time, since there are more options for reapplication and reconsideration if you can show you’re maintaining a healthier lifestyle or medical treatment for a year or more.

Final expense life insurance

If you don’t qualify for term life insurance or a guaranteed insurability rider due to age or illness, final expense insurance offers coverage with no medical exam and fewer health questions. While premiums are higher and death benefits are lower than term life insurance, these policies cover older age groups that guaranteed insurability riders don’t, allowing you to secure protection for your loved ones if you have health issues after your mid-40s.

The ladder strategy

If your principal concern is saving on your life insurance in the long term, the ladder strategy is a financial technique in which you overlap multiple term policies with varying coverage lengths and death benefit amounts. Each policy expires at a different time, so you have higher coverage during years you’re most likely to have debts and dependents and lower coverage as you age and your financial obligations decrease.

If you buy these policies when you’re young and healthy, your premiums for the policies that expire last will be lower than if you bought them at an older age, saving you money overall. Because this technique is complex, consult with a financial adviser and life insurance broker to find out if it makes sense for you.

A guaranteed insurability rider is a useful customization for life insurance policies, but if neither you nor your dependents have long-term health concerns, you probably don’t need one. For most people, the high premiums of permanent life insurance mean that buying a term policy is still the most affordable option, even if you do need to increase your coverage eventually.

Guaranteed insurability rider FAQ:

What does a guaranteed insurability rider do?

Guaranteed insurability riders allow you to add more coverage to your life insurance policy without undergoing a new medical exam or other underwriting.

When can I buy more coverage with a guaranteed insurability rider?

It depends on your rider and your insurance company, but most riders allow you to increase your coverage every three or five years starting from the first day of your policy or 30-90 days before a life event like a marriage or childbirth.

Who should get a guaranteed insurability rider?

If you or your child have a health condition that will worsen as you or your child ages, then a guaranteed insurability rider could be a good option for you. Most relatively healthy adults will save money and be able to get higher coverage amounts by buying term life insurance instead.

How much does a guaranteed insurability rider cost?

The price varies by insurance company, but typically the rider can be added to your policy for $3-5 per month.

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.