Choosing a life insurance policy can be pretty difficult: not only are there a variety of policies at different prices, but also some of them are missing one or two coverage options you need. For these situations, there are insurance riders. Riders are customizable add-ons to your existing insurance policies: they can provide extra features and protections not covered under standard policies. Since insurance policies often have limited customization abilities, riders can help ensure youre covering everything you want covered, while still paying the lowest possible price for the policy you need.
For life insurance, riders are especially important because your insurance needs may change at different points in your life. To make sure youre taking full advantage of your insurance possibilities, and to help you cover everything you need, here are the top five life insurance riders to consider adding to your policy. While the availability, cost, and policies of these riders will vary across every insurance company, this list can give you a good idea of the most useful riders available.
Accelerated Death Benefit (ADB)
The Accelerated Death Benefit Rider is one of the most frequently offered riders, and has become such an industry standard that some companies even include this rider in your policy automatically. The ADB rider allows you to collect some, or even all, of the death benefit of your life insurance if you are diagnosed with a serious illness, whether it is a terminal illness or one which requires long-term care and hospitalization. Individual policies determine how much of the death benefit is available at this point, usually capping somewhere between $250,000 and $500,000. This allotted money is deducted from your death benefit and can be used for any expenses, whether medical/hospital bills or living expenses, in order to reduce the financial strain caused by a sudden inability to work.
Accidental Death/Accidental Death And Dismemberment Rider (AD&D)
An Accidental Death Rider can be added to an insurance policy in order to increase the payment amount if the insurance holder dies in an accident. A common version of this rider pays out twice the original amount of your life insurance in case of accidental death, and for this reason, the Accidental Death Rider is often referred to as double indemnity. An altered version, known as an Accidental Death and Dismemberment Rider (AD&D), allows the insurance holder to collect additional payment in case of dismemberment or loss of sight.
Guaranteed Insurability Rider (GIO) Or Additional Purchase Option (APO)
The Guaranteed Insurability Rider is an option usually utilized by younger policyholders. It allows the holder to purchase additional insurance further down the line, without needing to repeatedly provide evidence of insurability. The most common installment of this allows the holder to purchase additional insurance at major life events (such as marriage, birth, or adoption), and additionally every three years from age 25 to age 40. This rider is useful not only for younger insurance holders who cannot immediately afford to pay the premiums for larger face amounts, but also for any holders who think they may want to buy more insurance later.
Waiver Of Premium
Paying the premium on your life insurance policy is required in order to keep the policy in place, but disabilities and serious illness can sometimes prevent the insurance holder from working, making it difficult to pay these premiums. The waiver of premium rider accounts for this, exempting the policy holder from the requirement of paying their premium in the case of disability. The conditions on this rider vary from company to company, however. Youll need to check with your company to see the specifics, such as the waiting period before qualification (usually 4-6 months), the definition of total disability, and the expiration age of waiver coverage (usually around age 60-70).
Disability Income Rider (DIR)
In the case of total disability, a DIR provides both a waiver of premium and a supplementary income, paid out to the insured monthly. This monthly pension is usually calculated as a percentage of your total face value, commonly one percent. Additionally, individual insurers may limit the maximum amount of monthly disability income to a certain value.
If youre not quite sure which riders are right for you, you can always hold off, consult an agent, and make a decision later. Life insurance riders are valuable because they can streamline and customize your insurance policy, so its important to know exactly which riders will be right for your price range and situation.