Bundling Comes to Life Insurance via Additional Insured Riders

Additional insured riders generally are term insurance riders on insureds other than the insured named in the base policy. One of the most common uses of the additional insured rider is in what is called the family policy. The family policy insures all or selected members of the family in one contract. Typically the base policy is some form of permanent cash value policy on the principal breadwinner with term riders on the spouse and children. Although variations exist, the usual plan calls for a specified percentage of coverage for the spouse and children for each unit of coverage on the principal breadwinner. For example, for each $10,000 of coverage on the husband, the plan provides $3,000 of term coverage for the wife and $2,000 of term coverage for each child under a specified age, generally age eighteen. All children living with the family are covered, even if born or adopted after the insurer issued the policy.

Additional insured riders also are commonly used in first-to-die plans, often in business applications, such as to fund buy/sell agreements. The principal advantages, in either case, are the economies of one policy issue and administration and the flexibility to structure the plan to meet specific planning needs.

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

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