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What is a life insurance rider?

Riders are optional, additional terms and conditions that go into force along with the rest of the policy. Each add-on rider may increase your premium, but they include benefits on top of normal life insurance coverage.

When you buy life insurance, the terms and conditions are spelled out in the policy. The policy will tell you how much coverage you purchased, how much your premiums are, and the ways in which a beneficiary becomes eligible to claim the death benefit when you die. Whether you purchased term life insurance or whole life insurance, your policy will explain everything about your coverage, including how long it lasts, whether it has a cash-value component, and how long you need to pay your premiums for.

Some people may want to customize their policy by adding a rider to the document. Riders are optional, additional terms and conditions that go into force along with the rest of the policy. Each add-on rider may increase your premium, but they include benefits on top of normal life insurance coverage. Such extras include the ability to convert a term life insurance policy into a whole life insurance policy, temporarily waiving premiums if you become disabled, and even receiving part of the death benefit early.

Our agents can help you through every step of the application process, including answering your questions about riders. You can get started by comparing life insurance quotes.

Each rider will explain the guidelines and exceptions specific to the rider, but they are meant to enhance the coverage your policy already provides. They can be divided up into different categories:

Family riders

Family riders allow for additional coverage for members of your family, like your children or spouse. For an increase in premiums, such riders will provide a death benefit to you if the person named in the rider dies.

Spousal rider

If you buy life insurance, you probably factored in the loss of your income when calculating the amount of coverage you needed. But if your spouse also contributes to the household income, you need to figure that into your coverage as well. Even if your spouse doesn’t earn an income but takes care of the kids, you may want to add a spousal rider to account for the extra child care costs you’d incur if he or she were no longer here.

One way to make sure your household isn’t burdened by the loss of your spouse’s income is to add a spousal rider to your life insurance policy. While you’ll pay more for coverage, a spouse rider ensures that if your spouse dies you’ll receive a death benefit just like your beneficiaries would if you die.

Spousal riders are less expensive than taking out a whole separate policy for your spouse, but that’s because they offer lower coverage. If you truly want to make sure your household is protected from the loss of your spouse’s financial contribution, your spouse should take out his or her own actual policy. (We can help spouses compare and buy life insurance together here.)

Child riders

Most children don’t need life insurance. That’s because they have no dependents and almost certainly no income to replace if they die (unless they’re a child celebrity supporting their family). The main reason to consider buying life insurance for your kid is if you know that he or she has a medical condition that could make him or her harder or even impossible to insure later in life, and you want to make sure you get good rates now.

But if your child is healthy and not a movie star or famous Olympian or otherwise providing income for your family, there still might be unexpected expenses you could incur if the child dies that a small death benefit would cover. For that reason, child riders are a good way to receive a low amount of coverage in return for a low increase in premiums.

Child riders cost an additional $5 to $7 per month and pay out a death benefit if your child dies that should be enough to cover costs like medical bills or funeral expenses. They are also known as child-protection riders. You can add a child-protection rider to your policy when your child is two weeks old, and the term of the rider ends when he or she turns 18.

A single child rider can cover all the children in your household.

Accelerated benefit riders

Accelerated benefit riders provide you with financial protection even while alive. These riders take money out of your death benefit to help you with expenses during qualifying circumstances while you’re still alive. Also called a living benefits riders, accelerated benefit riders help people who are living with an illness and are unable to take care of themselves. There are several types.

Terminal illness accelerated death benefit rider (also called accelerated death benefits)

The most common type of accelerated death benefits rider is usually just called an accelerated death benefit rider or simply accelerated death benefits (ADB). This rider provides benefits when you terminal illness.

The terminal illness accelerated death benefit rider is specifically tailored toward illnesses where you don’t have much time left — most policies denote that the diagnosis must be 6 to 12 months to live.

Most life insurance companies include this accelerated death benefit rider at no additional charge. But you will need to get a diagnosis from your doctor confirming that you are terminally ill.

Accelerated death benefits cover end-of-life care such as hospice care, living in a nursing home or hiring a private caretaker. Because you’re tapping into the death benefit, ADB riders are often called “living benefit” riders. As opposed to the critical-illness benefit, the accelerated death benefit is paid out as needed instead of a lump sum. The amount can vary, but it can be as high as 80% of the death benefit.

The funds don’t have to be used for care. Some insurers even suggest that you use the living benefit to pay for a vacation. While the payout is probably not taxable, you should check with a tax law expert to confirm, as it may vary in your state.

Critical-illness rider

Critical-illness riders pay out accelerated benefits to the policyholder to cover treatment for certain illnesses specified by the policy, which could include heart attack, life-threatening cancer, stroke, kidney failure, ALS and other critical conditions that will most likely limit your life expectancy. Check the terms of the rider to make sure the illness is covered.

Critical-illness riders trigger a payout before the policyholder has died. The money for the payout is taken out of the death benefit and is disbursed as a lump sum. When the policyholder dies, his or her beneficiaries will still receive the death benefit, but it will be reduced by the amount already used for medical care.

The illnesses specified in the critical-illness rider are survivable, but they’ll usually leave you with stacks of medical bills, so it may be a worthwhile addition to your main life insurance policy.

Chronic illness rider

Some insurance companies offer a chronic illness rider, which will begin paying out accelerated benefits while you’re still alive if you are no longer able to perform at least two of the six Activities for Daily Living (ADL) — eating, bathing, getting dressed, toileting, transferring, and continence. A medical professional must certify that the disability is permanent.

Long-term care (LTC) rider

Like the chronic illness rider, the long-term care rider activates your benefits when you can no longer perform two of the six Activities for Daily Living. However, the LTC rider pays explicitly for care in a long-term care facility, and pays benefits on a reimbursement model directly to the care provider. LTC riders require additional underwriting and may offer residual benefits in excess of the value of your original policy. That means that if your long-term care expenses end up being more than the value of your original death benefit, the policy will keep paying for your care until you die.

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Takeaway

Life insurance riders may add a little extra to your premiums, but if you're young and healthy you'll get a pretty low rate anyway.

Waiver of premium for disability rider

You need to pay your premiums to keep your life insurance policy in force, but that may become difficult or impossible to do if you become disabled and have to stop working.

Also called a disability income rider, waiver of premium disability riders allow you to waive premium payments if you incur a serious disability and can’t work. Like the accelerated death benefit rider, you’ll need proof of your disability from a medical professional.

With the disability income rider, you’ll still have the same life insurance policy you bought – nothing will change about the term of the amount of the death benefit. Each life insurance company will have a different idea of what constitutes disability, so make sure to read all the fine print.

Another option is to buy disability insurance, which goes beyond a simple waiver of premiums rider: you’ll receive a payment in the form of a disability benefit that will replace the income you lost while disabled. Check out rates for disability insurance here.

Benefit structure riders

While long-term care riders help you manage unexpected illness or disability, benefit structure riders trigger adjustments to the policy itself.

Return-of-premium rider

The return-of-premium rider is a term life insurance rider that refunds the premiums paid by the insured if he or she outlives the term. These riders can be expensive to tack on because you’re not only paying to receive the protection of life insurance coverage but also betting the life insurance company that you’ll get some form of cash anyway. The return-of-premium rider may more than triple your premiums, turning an affordable term policy into a huge expense.

Although you get all that money back at the end of the term (minus fees and the cost other riders), you may be better off simply paying low premiums now and investing the equivalent of return-of-premium costs into a retirement account and earning interest on it. With a return-of-premium rider, the money you spend doesn’t earn interest.

Some term policies are sold as return-of-premium policies, meaning you don’t need add a rider to your policy to get your money back at the end. But you should still approach these policies with the same caution about your expenses.

Term conversion rider

Term conversion riders allow you to convert a term life insurance policy into a permanent, or whole, life insurance policy at or near the end of the term. At that point, you’ll be retired or nearing retirement, so you’ll have fewer expenses like mortgages or childcare, but you may want to continue receiving coverage.

The term conversion life insurance rider lets you continue paying for life insurance coverage at an increased rate to extend your coverage for the rest of your life. Because of your age and potentially declining health, it may be cheaper to convert a term policy you already have to a permanent policy rather than reapply for a new term policy. And with a term conversion rider, you won’t have to retake the paramedical exam as you would when taking out a new policy.

Guaranteed insurability rider

The guaranteed insurability rider allows you to increase the size of your death benefit to a predetermined amount at specific intervals. Such milestones include when you reach a certain age or after the policy has been in force for certain number of years. Major life events, like marriage or having a baby, also trigger an increase in the size of the death benefit.

The guaranteed insurability rider can be helpful because your financial obligations may increase as you get older and have a mortgage and kids’ college tuition to think about.

You’ll have to pay more for the increase in coverage, but you won’t have to take a new paramedical exam and your health won’t be taken into account.

Accidental death and dismemberment rider

The accidental death and dismemberment rider doesn’t fit into the other categories because it adds coverage to your policy that normally isn’t included. It’s for people who have riskier habits, such as a dangerous job or hobby, and it will increase your premium. The extra cost frequently isn’t worth it, because the insurer rarely has to pay out for an accidental death or dismemberment.

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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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