Life Insurance Riders: What Are They and Why Might You Need One?

So you’re looking to buy life insurance. First, pat yourself on the back. It could be a smart move. And it may be an even smarter one if you add riders—or additional benefits—to your policy.

That’s because life insurance riders give you extra benefits that you wouldn’t get with a basic life insurance policy. And you can use them to customize your policy based on your needs.

Typically, riders are cheaper than purchasing stand-alone policies, meaning they can act as sort of a bonus deal.

“I could go buy a cancer policy, and a term life policy, and a disability policy, or I could have it all inside one policy,” says Jonathan Jacobi, a licensed insurance agent with HealthMarkets based in Omaha, Nebraska. “It may create efficiencies and lower costs.”

Many riders can be inexpensive or even free, and applying for one can be as simple as checking a box during the application process.

Looking to purchase a life insurance policy? Head over to healthmarkets.com to learn more, or schedule a call with a licensed insurance agent at (800) 827-9990.

A number of life insurance riders are available. Let’s take a closer look at seven of them.

1. Accelerated benefit rider

When purchasing life insurance, you may want to include an accelerated benefit rider—also known as living benefits. As part of the policy, it can give you access to death benefits while you’re still alive, says Jacobi.

“I’m a huge advocate of life insurance with living benefits,” says Jacobi. “Life insurance death benefits are there to protect those that you love. Life insurance with living benefits is going to help you if you get disabled or sick or hurt.”

To get an accelerated benefit for terminal illness, your doctor must diagnose you with a terminal illness that’s likely to result in your death in a given amount of time (usually within 12 to 24 months).

On the other hand, if you want to get accelerated benefits for a chronic or critical illness, your doctor must diagnose you with (or confirm that you have) one or the other.

These could include a heart attack, stroke, dementia, Alzheimer’s disease, or cancer, says Jacobi. The amount you’re paid is based on the diagnosis. “There’s no gray area,” Jacobi says.

It’s worth noting that accelerated benefits are usually paid in a lump sum. And getting them may reduce the amount of money your loved ones would receive when you die, Jacobi says.

So, for example, say you have a $500,000 benefit upon your death. If your insurance company issues you $100,000 to use before you die based on a diagnosis, your family would receive $400,000.

Many insurance companies offer the accelerated benefit rider for a terminal illness for free, says Jacobi. The chronic or critical illness version of the rider can be more costly. It may be worth it for folks in their 50s and older, says Jacobi, due to the increasing risk of chronic disease as you age.

2. Waiver of premium rider

The waiver of premium rider does exactly what it sounds like it does: It allows you to avoid all premiums (or monthly costs) if you suffer a disability and can no longer work, says Jacobi.

The reason you’d need this type of rider would be to reduce your monthly bills if you ever encountered financial hardship due to an accident or disability. You would not have to pay your life insurance premiums if you suffered from an ailment that prevented you from working.

“You would need to have a doctor confirm that you are disabled and unable to work,” Jacobi says. “A lot of companies don’t even charge you for this rider.” So you’d have nothing to lose by adding one on to your policy.

3. Child term rider

This life insurance add-on pays you a small benefit if your child dies unexpectedly.

But if your child happens to survive and reach a certain age (usually between 18 and 25, depending on the policy), you can turn this rider into a permanent policy for your child—and it must be approved by your insurance provider. “There’s no underwriting,” Jacobi says. “It’s guaranteed.” And you can increase the benefit by up to 10 times the original amount, he says.

A child rider can be inexpensive, too. It may add only $5 to $10 to your monthly premium, Jacobi says.

Supplemental life insurance could make all the difference for you and your loved ones. Head over to healthmarkets.com to learn more about it, or  call a licensed insurance agent at (800) 827-9990.

4. Disability rider

Let’s say you get in a car accident and hurt your leg so badly that you can’t work for a long stretch of time. That’s the type of situation where a disability rider would help out.

With this type of rider, you’d get monthly payments for a specific period of time—usually two to four years, Jacobi says.

Unlike with an accelerated benefit rider, though, these payments wouldn’t be taken out of your loved ones’ benefit if you were to die, he notes.

You may also want to consider a disability rider if you earn the most money in your family, or if you’re the owner of a business and can’t get disability insurance through an employer, Jacobi says.

Combining life insurance and disability insurance like this—instead of getting two separate policies—can help you save on underwriting fees, he adds.

5. Guaranteed insurability rider

Younger adults take note: A guaranteed insurability rider might be best for you. It lets you increase your insurance policy’s death benefit later on, regardless of how healthy you are at the time you sign up for it.

For example, let’s say you apply for the rider and get it. You could then increase your coverage at certain ages—maybe when you get married or have your first child. In other words, at times in your life when you may need more coverage.

And the insurance company must give it to you, no further underwriting included.

6. Accidental death rider

Thinking about getting an accidental death rider might not provide you with the happiest picture, but it could end up being an incredibly important one for your loved ones.

This benefit provides an increased payout to your family—perhaps two or three times the amount on your life insurance policy—if you were to die in an accident.

Typically, for your loved ones to benefit from the rider, your death would have to occur by a certain age, like 65.

7. Long-term care rider

A long-term care rider could be a good option if you someday have to enter a nursing home or assisted-living facility.

The rider lets you use some of your life insurance’s death benefit to help pay for your stay, Jacobi says. If you don’t use all the benefits, your beneficiaries will receive the rest when you die.

Again, if you add a long-term care rider to your life insurance policy, you could possibly save on the costs of having two separate policies.

And unlike long-term care insurance, you don’t have to worry about not having the chance to use your benefit, Jacobi notes. “Everyone passes away,” he says, “so the benefit will be paid at some point.”

Additional facts about riders:

• Because the benefits are coming out of a life insurance policy, you typically don’t have to pay taxes on them, says Jacobi. So in many cases you get the benefits tax-free.
• You’ll have to pay for riders in addition to your monthly premium—or your insurance bill.
• Riders can provide extra benefits, particularly if you get in an accident, have a disability, or suffer from an illness.
• Your benefit can be paid either as a lump sum or in regular installments, depending on the rider.
• Getting a rider could require additional evaluation by your insurance provider, Jacobi notes. For example, if you apply for a rider for a chronic or critical illness, the provider may take a closer look at your health status, Jacobi says. It’s possible that you could be approved for life insurance but denied the rider, depending on the findings.

Want to help make sure sure your loved ones are covered after you’re gone? Head over to healthmarkets.com to learn more about supplemental life insurance and schedule a call with a licensed insurance agent at (800) 827-9990 today.