Before you finalize your life insurance policy, you should consider life insurance riders. These policy riders can provide additional insurance protection and give you more flexibility and options in the future.
"When considering various types of insurance riders, make sure you understand the cost and the terms under which you'll be able to make a claim. Conduct a bit of independent research to find out how likely you are to be eligible to make a claim, as well," says Lingke Wang, co-founder of Ethos.
Below are life insurance experts’ thoughts on useful and common life insurance riders.
Insurance and savings is how many people prepare for emergencies and unpredictable what-ifs. Life insurance premiums can be very affordable depending on your age, the amount of insurance purchased, and your budget.
Experiencing a long- or short-term disability can affect your ability to work and what your budget looks like.
Fortunately, there are two ways to handle this situation: add a disability premium waiver or buy disability insurance.
Mike Raines, an independent life insurance agent, agrees: “The waiver of premium rider is probably the most valuable, especially if the premium on the life policy is significant. This rider added to the policy will typically waive the premium if the insured is disabled and unable to work. Often times the waiver of premium option will drop off a policy at an older age such as 55.”
This rider may be more important to add depending on what you do for a living.
Chelsie Ball, a licensed life insurance agent with TermLife2Go.com, says, “As with all life insurance the riders you add to a policy depend on your individual situation. Waiver of premium rider can be a great rider to add if you work in more high risk industries. This might be good to invest in if your job puts you at a higher risk of being injured.”
While this is a handy rider to include with your insurance policy, it is limited.
“Often times the waiver of premium option will drop off a policy at an older age such as 55,” Raines adds.
However, considering the limitations of a disability rider, purchasing disability insurance may be a better idea in the long run.
Wang explains, “If a waiver of premium rider looks tempting, keep in mind that it's usually more cost-effective to buy adequate disability insurance. 30 percent of workers experience disability at some point, so buying this type of insurance may be a better option for you.”
Some people buy the amount of life insurance they can afford and plan to buy additional coverage later.
David Duford, from Buy Life Insurance for Burial, says, “Normally, to add coverage, an applicant must apply for a new life insurance policy and is subject to underwriting their current state of health, even if the applicant already owns life insurance with the same company.”
If you plan to add additional health insurance coverage later, a guaranteed insurability rider on your policy is a good idea.
Ball advises “A guaranteed insurability rider is a life insurance rider that allows the owner of a life insurance policy to buy additional life insurance with no underwriting. This can be highly beneficial if after your original purchases your finances grow and your health also decreases. Generally, health conditions can either increase your rate or sometimes your coverage request can be declined.”
No one really knows what the future holds. When it comes to health conditions, aging is tough and you may need to have someone available to take care of you around the clock.
Dina Golub, Director of Operations for AIA Direct, says, “Another rider that is also valuable, but less common, is a long-term care rider. This type of coverage offers benefits if the policyholder is moved to long-term care, such as a nursing home.”
Of course, this rider is probably only worth it if you are purchasing a permanent life insurance policy.
John Holloway, Co-founder and Agent at NoExam.com, says, “Another common rider is the accelerated death benefit rider. If the insured is diagnosed with a terminal illness, it allows them to receive some of their death benefit to cover medical expenses.”
Medical care can be quite expensive, so this rider helps defray the costs of hospice care. It is important to note, that the total sum of the death benefit does not change. An accelerated death benefit just allows for part of the death benefit to be disbursed early.
If you plan on having a family, adding a child term life rider is a good option.
Holloway advises, “One rider I recommend often is the child term life rider. It provides coverage for children, without having to apply for a separate policy. This is a better option than buying some of the whole life policies on the market that are marketed as children's life insurance.”
Duford says, “An accidental death rider pays an additional death benefit, typically two- or three-times the coverage amount, if the insured dies by means of an accident. The rider is very affordable, and provides a way to maximize quantity of coverage, especially if the insured cannot afford full natural death coverage.”
Wang adds, “Accidental death and dismemberment insurance is almost never a good deal. It's a better bet to buy additional term life insurance coverage. The changes of an accidental death and dismemberment rider increasing the actual death benefit are very low since most people don't die in an accident or ever experience dismemberment.”
Life insurance, especially term life insurance, can seem like a good way to throw away money. The younger you are, the less likely you are to die. However, some insurance companies offer a return on premium rider with their term life insurance policies.
Ball offers this advice: “If you are looking to invest in a term policy to cover some of your expenses you may want to consider a return of premium rider. This rider allows paid premiums to be returned if the insured outlives the term of the policy. The exact details of this rider can vary based on the carrier.”
With a return on premium rider, you’re purchasing insurance protection for your family and friends and also setting aside future savings for yourself.