Life Insurance Riders | Bankrate

If you are shopping for life insurance, you may run into terms that are unfamiliar, like riders. Riders in life insurance are optional benefits you can add to your policy. These additional provisions, akin to add-ons or enhancements, allow individuals to tailor their life insurance to better suit their specific needs and circumstances. From accelerating death benefits to adding coverage for critical illness or disability, understanding the myriad options available through riders can empower policyholders to create a personalized safety net that provides financial security and peace of mind for themselves and their loved ones. Bankrate can help you understand the different types of life insurance riders that may be available to you and how to customize your insurance policy using riders to meet your needs.

What is a life insurance rider?

An insurance rider is a policy add-on that provides additional coverage and extends the terms and conditions of your policy. For instance, many life insurance riders allow you to use the money from your policy before you die. Life insurance companies sell a variety of riders which you can use to personalize your coverage based on your needs.

As a policyholder, you can purchase as many riders as your life insurance provider sells. That means you have full control over how much coverage you have. However, each rider you add could cause your premium to increase. Some riders might be worth the money, while others may not add significant benefits. Which riders are available may not only depend on your carrier but also on whether you have term, universal or whole life insurance.

Common types of life insurance riders

Insurance riders are meant to personalize your coverage if basic life insurance doesn’t quite meet all your needs. There are several options for life insurance riders, and these will vary among life insurance providers, so you’ll likely want to do your research to find out which type might be best for you and your beneficiaries. Although there are numerous types of riders available, below are some of the most common life insurance riders.

Accelerated death benefit rider

An accelerated death benefit rider is one of the most popular life insurance riders, and most insurance providers offer it at no additional cost. This rider allows the policyholder to use their death benefits if they get diagnosed with a terminal illness that could cause an early death. Having access to your death benefit in this situation can help cover medical bills or help you better navigate this unforeseen situation in terms of financial planning for your estate. 

However, it’s worth noting that accessing these funds will reduce the death benefit that will be available to your beneficiaries. The terms of this rider can vary slightly by insurer, so be sure to read the fine print.

Long-term care rider

If you need to stay at an assisted living facility or receive home care as you get older, a long-term care rider, generally only available on permanent life insurance policies, could help you cover the monthly payments. Some examples of qualifying long-term centers are nursing homes, adult day care, hospice and memory care facilities. Some insurance companies allow the long-term care rider to be used for family members of the policyholder. 

There are two types of long-term care riders: reimbursement riders and indemnity riders. A reimbursement rider can help pay the cost of your long-term care expenses every month — up to the policy’s limit — whereas an indemnity rider is a predetermined amount of money that is paid out monthly, regardless of the total cost of your long-term care. Policyholders may find this rider beneficial so that they are not tapping into their savings or depleting estate assets just to fund long-term care — though use of the funds will reduce the death benefit that is ultimately available to beneficiaries.

Accidental death rider

After you pass away, your beneficiaries receive compensation from your policy’s death benefit. However, if your death is due to accidental bodily injury, an accidental death rider may allow your beneficiaries to receive double the amount of money in the policy. Keep in mind that not all accidents are covered. Risky activities, like skydiving, are not covered. However, if you work in a factory and are fatally injured by equipment or machinery, your beneficiaries would likely receive an additional death benefit. 

This rider may also be called “accidental death and dismemberment” or “double indemnity” by insurance companies and agents. This rider is worth considering to alleviate some financial burdens that may result in the event of an early death, especially if you are still providing an income that benefits your family.

Waiver of premium rider

If you become disabled or lose your income due to injury or illness, the waiver of premium rider typically allows you to stop paying your policy’s monthly premium. When you’re able to go back to work, you’ll be required to start making the payments again. One important contingency to the waiver of premium rider is that you’re only covered up to a certain age — typically until the age of retirement.

Guaranteed insurability rider

In order to get approved for a life insurance policy, you often need to complete and pass a medical exam. With a guaranteed insurability rider, you can typically adjust your coverage throughout your lifetime without needing to take another medical exam. This rider is especially valuable because it allows you to apply for additional coverage if your health declines without a reevaluation.

Return of premium rider

With a return of premium rider, you pay a small monthly premium and can receive some or all of what you paid in. With term life insurance, you recoup the premiums paid if you outlive the policy’s term length. If you pass away before the term is up, your beneficiaries receive the death benefit. If you have permanent life insurance, this rider allows you to surrender your policy and receive some or all of your premium payments back. This is typically one of the most expensive riders you can purchase since the insurance company is likely making a payment at some point.

Family income benefit rider

If you are the only person in your family that has an income, consider purchasing a family income benefit rider. This add-on rider can help provide a consistent income to your family after you pass away, in addition to the lump sum they’ll receive from the death benefit.

Child term rider

A child term rider will pay out a death benefit in the event that a child passes away before a certain age. Although it can be difficult to consider the costs associated with burying a child, it is even harder to deal with those expenses while grieving. These policies are typically in place until a child turns 25 or at the end of their parents’ term policy, typically whichever comes first. Once the term expires, this policy can convert into a permanent life insurance policy (sometimes up to five times the amount of the original coverage) without needing a health exam.

Term conversion rider

A term conversion rider allows the policyholder to convert the term policy into a permanent life insurance policy without the need for a medical exam or proving insurability. This rider provides flexibility by enabling policyholders to adapt their coverage as their needs change over time, transitioning from temporary protection to a permanent solution without additional underwriting requirements. It is common for insurance providers to offer this rider for no additional charge.

Chronic illness rider

A chronic illness rider allows the policyholder to access a portion of the death benefit if they are diagnosed with a chronic illness, though doing so will ultimately reduce the amount of benefit made available to beneficiaries after death. This rider provides financial support to cover medical expenses or long-term care costs associated with the chronic illness while the insured is still alive. 

The payout is typically tax-free and can help alleviate the financial burden on the policyholder and their family during a challenging time. To qualify, you will typically need a doctor to confirm that you are unable to complete at least two out of six activities of daily living.

Spousal rider

This rider provides a payout if the policyholder’s spouse dies. However, this may not be the most secure option. If the policyholder dies before their spouse, the spouse will not receive a payout and may fare better with their own policy.

Disability rider

A disability rider could pay out a monthly income if the policyholder becomes disabled. If you meet the criteria for disability outlined in the rider, the policy may provide a monthly income benefit for a specified period. These periods and payouts are typically capped by the policy and will be determined based on your age, health, occupation and policy.

Are insurance riders worth it?

Determining whether insurance riders are worth it depends on your individual circumstances and needs. For some, riders offer valuable additional benefits that enhance the overall coverage of a life insurance policy. However, some may not be necessary for your situation. It is essential to carefully assess the cost versus the potential benefits of each rider because most riders will increase your premium.

Some riders, like a return of premium rider, may offer a financial return if certain conditions are met, making them attractive to those seeking a potential refund of premiums paid. Others, such as chronic illness or disability riders, provide crucial financial protection in specific situations, offering peace of mind for policyholders and their families. Consider your potential needs and risk factors, and keep in mind what your beneficiaries may need in order to feel secure if you were to pass away.

Ultimately, the decision to add riders to a policy should be based on an individual’s financial situation, risk tolerance and priorities. You may want to consult with a financial advisor or insurance professional to evaluate the cost-benefit aspect and determine which riders, if any, align best with your needs and budget.

Frequently asked questions

• What is the best life insurance rider?
  

  Life insurance riders allow you to personalize your insurance coverage, so the best life insurance rider is the one that best covers your specific needs. When you are shopping for coverage, check which rider options are available at different life insurance companies to make sure your specific situation can be covered. If you are not sure what type of rider you need, explain your life insurance goals to a licensed agent or certified financial planner so that they may help you understand where your standard policy falls short on coverage.

• Can family members take advantage of my life insurance riders?
  

  Yes, certain riders are designed to cover family members and beneficiaries rather than the policyholder. Every insurance company has different terms and conditions for the riders they sell, so make sure you understand what is covered and who is covered before purchasing a rider.

• How many life insurance riders can you purchase?
  

  The exact answer can vary between carriers, as they set many of their own internal rules. However, in general, there is no specific maximum on the number of riders your life insurance policy can have. Riders usually increase the premium cost of a policy, meaning the more riders you add, the more you will pay. For this reason, it may be wise to focus only on those policy riders that will add value to your plan and help it to meet your needs. Ultimately, the limit will depend on a combination of what your carrier offers and what your budget can handle.

• Can I get joint life insurance?
  

  Joint life insurance policies are designed to cover a couple instead of an individual. There are two types of joint life insurance — a “first-to-die” policy and a “second-to-die” policy. A “first-to-die” policy pays the death benefit out to the surviving spouse after one passes away, which could help your spouse survive financially without a second income. A “second-to-die” policy only pays the death benefit out once both insureds have died, which might be an attractive option for couples seeking to pay only one premium.