A Guide to Life Insurance Riders: Which do You Need and Why?

The practice of life insurance is several hundred years old. And the history of life insurance riders isn’t much older. 

Life insurance riders provide you with extra coverage for your life insurance policy. They can also accommodate any events that are unexpected and are not covered under your policy alone. Some common life insurance riders are included for free in your policy, like the term conversion rider.

However, other riders can be hard to qualify for and cost extra, like the waiver of premium rider. 

Whether or not you should get a rider depends on how much more you can afford to pay on your policy’s premiums, what coverage you are looking for, and the type of life insurance rider you’re adding. Many times, an insurance policy on its own will offer you more coverage than a rider will. However, some riders are certainly worth the extra cost. 

So keep on reading and we’ll walk you through some of the most common life insurance riders you need to be aware of. 

Accelerated Death Benefit Insurance Riders

You can receive financial protection while you’re still alive if you get accelerated death benefit insurance riders. These riders work by taking money out of your life insurance death benefit and they help you with costs during unexpected and qualifying situations. 

An accelerated death benefit is also known as a living benefits rider. It’s able to help people who are living with an illness and they aren’t able to take care of themselves. There are multiple types of accelerated death benefit insurance riders out there.

Terminal Illness Accelerated Death Benefit Insurance Rider

An accelerated death benefit rider, or ADB, pays benefits out when the policyholder has a terminal illness. Many life insurance providers will include the accelerated death benefit rider in a policy at no additional cost.

The terminal illness ADB insurance rider is meant for sicknesses where people will not live for much longer. Your doctor will have to confirm that your illness is terminal that you have six months to one year to live in order to be eligible for a payout. 

These kinds of insurance riders cover end-of-life care. That includes hiring a private caretaker, living in a nursing home, and hospice care. 

Some insurance providers will even suggest to you to use your living benefit to pay for something like a vacation or something else to make your final days as pleasant and easy as possible.

The amount of money that you can receive is going to vary. However, it can be as high as eighty percent of the death benefit. 

Your payout is likely not subject to taxes. However, it’s still important that you consult a tax law expert so that you confirm this is true for your state.  

Critical Illness Insurance Riders

A critical illness insurance rider will pay out accelerated benefits while the policyholder is still alive. These payments are meant to cover treatment for certain diseases that are specified by the policy.

These illnesses can include amyotrophic lateral sclerosis (ALS), kidney failure, stroke, life-threatening cancer, heart attacks, and other critical illnesses that could limit your life expectancy and leave you with expensive healthcare costs.

The terms of the rider are going to specify if a certain sickness is covered. 

The money that comes from the payout is going to be coming out of the death benefit. It will then be given as a lump sum. If you pass away, then your designated beneficiaries will be given whatever money is left of the death benefit. 

Chronic Illness Insurance Rider

There are some insurance providers that offer a rider for chronic illnesses. These will start to pay out accelerated benefits while you’re still living if you aren’t able to perform at least two of the six Activities for Daily Living (ADL). 

Those six activities are:

  • continence
  • transferring
  • toileting
  • getting dressed
  • bathing
  • eating

A healthcare provider will need to certify that your disability is not temporary. Around twenty percent of adults over 85 need help with ADL.

Long Term Care (LTC) Insurance Rider

A long term care insurance rider can be added to your life insurance policy in order to make a hybrid long term care policy. The long term care insurance rider, similar to the chronic illness rider, will activate your benefits when you’re no longer able to perform at least two of the activities for daily living. 

However, the long term care rider will explicitly pay for expenses related to long term care. 

Long term care insurance riders usually come at an expensive additional cost. However, they might offer benefits that are worth more than the value of your original life insurance plan.

This means that if your long term care costs end up costing you more than the value of the original death benefit, your insurance company is going to continue to pay for your long term care until you pass away. 

Waiver of Premium for Disability Insurance Rider

The waiver of premium for disability insurance rider is also known as a disability income rider. It is a waiver of premium insurance rider. It waives the premium payments of your life insurance policy if you end up incurring a severe disability and aren’t able to work anymore. 

Every life insurance provider is going to have a different definition of what a disability is. It can also be difficult for someone to qualify for this waiver. 

You will likely be better protected with something like disability insurance. This goes much further than a basic waiver of premiums rider. Instead, you’ll be able to get a payment in the form of a disability benefit. This is going to replace the income that you lost while you’re disabled. 

Family Insurance Riders

A family insurance rider will offer you extra coverage for people who are in your family. This can include your spouse and your children.

You pay more money to have the rider pay out the death benefit to you if the person who is named in the rider passes away.

Child Insurance Riders

Many kids don’t need to take out a life insurance policy. This is because they don’t have any dependents and they don’t have any income to replace if they die. However, this might be a different situation if the child is a celebrity whose income is supporting their family.

The main reason to get life insurance for a child is if they have an illness that can make it harder to insure them later in life. You can get them insurance while they’re young to lock in better rates. 

However, if your child is healthy and they aren’t a famous athlete or a celebrity, then you still might incur unexpected expenses if your child passes away. A small death benefit could cover these costs. 

A child insurance rider is a good way to get a little bit of coverage in return for a small increase in your premium payments. It might be as little as an extra $5 per month.

Spousal Insurance Rider

If your husband or wife also contributes to your household income, then you need to figure that into your life insurance coverage. Even if your spouse doesn’t earn an income, adding a rider for your spouse will account for the extra child care costs you would incur if they died. 

While you will pay more for coverage, this kind of rider will make sure that you’ll receive a death benefit if your spouse dies. A spousal rider will cost you less money than if you took out a separate policy for your spouse. However, you’ll also get lower coverage. 

Paid Up Additional Rider

You can add paid up additional insurance to your whole life insurance coverage. Instead of using your premiums, you pay for this rider with your plan’s dividends. 

With paid up additions, you can increase your living benefit and death benefit by increasing the cash value of your policy. These riders will earn dividends on their own. And the value will continue to indefinitely compound over time. 

The Importance of Knowing About Life Insurance Riders

Hopefully, after reading the above article, you now have a better understanding of life insurance riders. By knowing more about riders, you’ll be able to make the most of your life insurance policies. You’ll also be able to better protect yourself, your spouse, and your children. 

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