Insurance riders are add-ons to your life insurance policy. Riders are designed to create more robust coverage to offer additional financial support in certain circumstances.
Some life insurance riders are common enough that most providers will include them in your policy automatically without increasing your premiums.
Other riders come with an added cost to your monthly premiums. The pricing may vary depending on your insurance company, your health, the state where you live, and the amount of coverage you buy through the rider.
When you’re purchasing your life insurance policy, your agent or broker can help you determine what life insurance riders you need.
What are the types of life insurance riders?
Most riders fall into one of five categories. For some categories, a standalone insurance policy is often going to offer more coverage than a rider will, but some add-ons might be worth an additional cost, depending on your needs. The five types of life insurance riders you can choose from are:
Accelerated death benefit insurance riders
Accelerated death benefit insurance riders (ADB) take money from the death benefit to pay your medical expenses if you have a terminal illness. You'll need a doctor's diagnosis to confirm that you’re terminally ill and have 6 to 12 months to live in order to be eligible for a payout.
ADB riders are often used to help with end-of-life care such as hospice care, living in a nursing home or hiring a private caretaker. But 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 or anything that can make your final days as easy and enjoyable as possible.
These benefits are paid out as needed instead of in a lump sum. The amount you receive can vary, but it can be as high as 80% of the death benefit.
Critical illness insurance riders
Critical illness insurance riders pay out accelerated benefits while you’re alive to cover treatment for certain illnesses that are specified in your policy. This could include a heart attack, cancer, stroke, kidney failure, ALS, and other critical conditions that would limit your life expectancy and leave you with unaffordable medical bills.
The money for the payout is taken out of the death benefit and is disbursed as a lump sum. If you die, your beneficiaries will receive whatever is left of the death benefit when they file a claim on your policy. There are a few types of critical illness riders:
Chronic illness insurance rider
Chronic illness riders pay out accelerated benefits while you’re still alive if you are no longer able to perform at least two of the six activities of daily living (ADLs) — eating, bathing, getting dressed, toileting, transferring, and continence.
Long-term care (LTC) insurance rider
A traditional life insurance policy with a long-term care (LTC) rider is called a hybrid long-term care policy. The rider will pay out your death benefit for long-term care while you're alive if you can no longer perform two of the six activities of daily living.
Adding LTC coverage often comes at a high additional cost and is priced based on your health at the time of purchase, not a flat fee like some other riders.
Waiver of premium for disability insurance rider
A waiver of premium insurance rider waives your life insurance policy’s premium payments if you become disabled and can no longer work. This rider can add $10 to $50 per month to your premiums.
Family insurance riders
Family insurance riders offer additional coverage for members of your family, like your children or your spouse. The two types are:
Spousal insurance rider
If you don’t have a separate policy for your spouse, a spousal income rider ensures that if your spouse dies you’ll receive a death benefit. Spousal coverage, either through a rider or separate policy, is important even if your spouse doesn’t earn an income or isn’t the primary breadwinner.
Even if you'll still have to cover the costs of household labor they do, like childcare. While a spouse rider may cost less than a separate policy, it may also provide less coverage.
Child insurance 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 costs for grieving parents or secure coverage for children with medical conditions that might make getting a policy more difficult when they’re older.
Accidental death and dismemberment insurance riders
Accidental death and dismemberment insurance riders are for people who have riskier lifestyles, such as a dangerous job or hobby that will increase your premium. The AD&D rider pays you money from the death benefit if you lose a limb or digit in an accident.
If you die, it pays out to your beneficiaries. Because of the strict parameters under which the death or injury must occur to get a payout, an accidental death and dismemberment insurance rider usually isn’t worth the cost.
Benefit structure insurance riders
While long-term care riders help you manage unexpected illness or disability, benefit structure insurance riders trigger adjustments to the policy itself. Benefit structure insurance riders include:
Return-of-premium insurance rider
The return-of-premium insurance 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 these riders are expensive and might not be a worthwhile add-on.
Premiums are higher than for a standard term life policy and won’t earn interest like savings you put in a bank or investment account.
Term conversion insurance rider
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.
Family income rider
A family income rider adjusts how the death benefit will be paid out to your family if you die while the policy is active.
With this rider, instead of one lump sum, the policy pays out part of the death 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.
Guaranteed insurability rider
The guaranteed insurability rider allows you to increase the size of your death benefit at specific life milestones. The "option dates" when you can buy more coverage vary but usually occur every three or five years from the day your policy went in force and within 30 to 90 days of a major life event, such as getting married or having a baby.
You'll have to pay more for the increase in coverage, but you won’t have to go through underwriting or take a new medical exam before your policy's cutoff age, which is usually between age 40 and 50. After that, you can still add coverage, but you’ll have to take a medical exam.
Guaranteed insurability riders are not offered for every life insurance policy, and are most commonly added on to whole life insurance policies. Guaranteed insurability riders can be as low as an additional $3 to $5 per month.
Most people don’t need a guaranteed insurability rider because they need less life insurance as they get older and their health won’t worsen significantly before age 40 to 50.
The rider is best used by people who have a chronic illness or other condition that may worsen, a family history of serious illness that could affect them before age 45, or want a permanent policy and plan to increase their coverage in the future.
Are life insurance riders worth it?
Not all life insurance riders are created equal. While some can add extra value to your life insurance policy, others cost more than they’re worth.
For example, a term conversion insurance rider extends your coverage and is a worthwhile add-on because it comes at no additional cost.
A waiver of premium rider, on the other hand, is costly and doesn’t actually save you money based on the interest you’re losing out on if you invested the cost of rider, so it’s often not worth the extra money.
Whether or not a life insurance rider is worth it depends on your specific needs and largely 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 offers 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.
The best way to learn more about the availability and pricing of riders is by working with an insurance agent or broker. At Policygenius, our experts are licensed in all 50 states and can walk you through the entire life insurance buying process while offering transparent, unbiased advice.
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.