4 Riders that Limit Coverage on a Life Insurance Policy

Insurance companies may add certain riders or endorsements to the base contract to limit their liability under the base policy. The most common forms of limitations are the war rider, the aviation rider, the hazardous occupation or hazardous avocation rider, and the limited-benefit-period rider.

War Rider

The war rider provides that insurance will not pay a death benefit in the event of death due to war or acts of war. As a result of the Korean and Vietnam conflicts, insurers generally have broadened this rider to cover what is now described as military police actions as well.

Aviation Rider

The aviation rider excludes payment of death benefits in the event of death as a result of an airplane crash unless the insured is on a regularly scheduled commercial airline flight. This limitation is less frequently encountered today because aviation is much safer and the hazards more predictable than in the past. In most cases now, companies will charge an additional premium, which varies according to the experience of the pilot, the type of aircraft, and other factors such as the general nature of the flights, common destinations, and types of cargo. Most commercial pilots qualify for standard rates and can acquire standard insurance. Some insurers specialize in offering policies to noncommercial pilots. These insurers may underwrite some nonpilots—such as business executives—similarly to noncommercial pilots if they frequently use noncommercial flights to conduct business and travel to what the insurers consider hazardous landing facilities, such as small foreign landing fields. In some cases, the rider may exclude coverage for death in an airplane accident that occurs in a foreign country.

Hazardous Occupation or Avocation Rider

Many companies either will not issue policies on persons in hazardous occupations or who practice hazardous avocations or will exclude death benefits if death occurs as a direct result of practicing the occupation or engaging in the avocation. The hazardous occupation classification varies by company and may cover dozens of jobs from astronaut to lumberjack to skyscraper window cleaner. High-risk avocations normally include such things as skydiving, scuba diving, hang-gliding, mountain climbing, spelunking, race car driving, motocross racing, and similar high-risk activities. However, for almost any hazardous occupation or avocation, there is an insurer who specializes in writing insurance on such risks.

Limited Benefit Period Rider

Policies with limited benefit period riders are a form of modified death benefit policy. Generally, this rider limits death benefits to a return of premiums if death occurs within a specified period after the policy issue, typically two years. After the limitation period, the face amount either jumps up to a higher permanent level or increases gradually over a specified period of time. Insurers often issue policies with this rider when the insureds have a pre-existing health condition that would otherwise make them uninsurable. For example, someone who recently underwent cancer surgery might not otherwise qualify for coverage. However, if the person survives for a certain period of time after surgery, the probability of long-term survival increases. Consequently, after a certain limited benefit period, the insurer can be relatively assured that the risk of imminent death has decreased and can increase the face amount of coverage. In general, these policies are still highly rated with much higher than standard premiums relative to the face amount of coverage.

Similar to the case with hazardous occupations and avocations, some companies specialize in writing coverage on various forms of substandard health or unusual diseases.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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