A policy rider is an optional/additional benefit that can be added to a policy for an extra premium.
Legally, it is defined as a document that amends the policy or certificate. It may increase or decrease benefits, waive the condition of coverage, or in any other ways amend the original contract.
Traditional policies usually leave little room for modification or customization, except for deductibles and amount of coverage. Riders allow policyholders to create a life insurance policy that fits their specific needs.
Policy rider examples are:
Accelerated Death Benefit Rider
Rider that allows payment of a portion of the face amount prior to the death of the insured, if the insured is diagnosed with a terminal illness or injury.
Accidental Death Benefit
A benefit in addition to the face amount of a life insurance policy, payable if the insured dies as the result of an accident, which is sometimes referred to as “double indemnity”.
Annual Renewable Term Rider
Term life insurance that is “blended” into the policy, which reduces the premiums and will reduce the cash value.
A rider that provides insurance to the insured’s child(ren) that provides financial protection for the future.
Benefit that can be added to a life insurance policy under which the policy owner can purchase one-year term insurance equal to the percentage change in the consumer price index, with no evidence of insurability.
Disability Income Rider (generally on older policies)
This rider typically pays a monthly benefit of 1 percent of the death benefit of the coverage, in the event of permanent or total disability.
Guaranteed Insurability Option
Allows the purchase (optional) of additional coverage at certain intervals without providing evidence of insurability, meaning no underwriting.
Living Benefit Rider
A rider that allows policy owners who are terminally ill or who suffer from certain catastrophic diseases to collect part of their life insurance benefits before they die, primarily to pay for the care they require.
Other Insured Rider
Rider that provides coverage to an eligible business or family member other than the insured.
Rider that provides coverage to the insured’s spouse.
Terminal Illness Rider
See living benefit rider above.
Waiver of Cost of Insurance Rider (Universal life policies, generally)
Waives the cost of insurance in the event the insured becomes totally and permanently disabled during the life of the policy.
Waiver of Premium Rider (Term and whole policies, generally)
Provides that in the event the insured become totally and permanently disabled before a specified age, premiums on the contract will be waived during the continuance of the contract.
Keep in mind that many of these riders are more profitable for the insurance insurer and each insurer only offers certain riders per policy.
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By Tony Steuer, CLU, LA, CPFFE
Tony Steuer is an author and advocate for financial preparedness. Tony Steuer, CLU, LA, CPFFE, helps people make sense of the financial world in a way that’s easy for them to understand. His books including, “GET READY!,” “Insurance Made Easy,” and “Questions and Answers on Life Insurance,” have won numerous awards. Tony is the founder of the GET READY! Initiative which includes the GET READY! financial organization system, the GET READY! Financial Preparedness Club, GET READY! Podcast, and the GET READY! Financial Principles, a best practices playbook for the financial services industry. Tony served as long-term member of the California Department of Insurance Curriculum Board. Tony is regularly featured in the media including the New York Times, the Washington Post, Fast Company, and other media. He has also appeared as a guest on television shows, such as ABC’s “Seven on Your Side.” Visit https://tonysteuer.com/ to join the GET READY! Financial Preparedness Club and access free resources.