Optional additions to a life insurance policy, known as riders, can provide additional coverage or benefits not otherwise available. By personalizing your policy with riders, you can better suit your needs and those of your loved ones.
Some riders will increase the cost of your premium, while others may be included at no extra charge. Therefore, it is important to weigh the cost versus the benefits of each rider before making a decision.
In this article, we’ll discuss insurance riders that are typically offered with a whole life insurance policy so you can know which riders make the best sense for your circumstances.
Why Consider Life Insurance Policy Riders?
No one knows what the future holds, which is why having a whole life insurance policy is so important. You never know when your family might grow or your health might change, so it’s crucial to have a safety net in place. With a whole life insurance policy, you can rest assured knowing that you and your loved ones are taken care of no matter what happens.
There are many benefits to adding riders to your life insurance policy, regardless of which type of policy you have. Riders can provide extra financial protection and support, both while you’re alive and after you pass away. Whole life policies tend to have more available riders and be more customizable than term policies since they’re designed to cover your entire lifetime.
Additionally, insurance riders are the best solution for various life events that almost everyone will go through. Many life events impact us financially and so it makes good financial sense to prepare for the worst but hope for the best.
Life Insurance Riders Explained
As was mentioned earlier, the riders we’ll discuss in this article are for whole life insurance policies and are generally available from all of the highly-rated insurance companies.
Accelerated Death Benefit Rider ADB
Accelerated death benefit riders are designed to help pay for medical expenses in the event of a terminal diagnosis. In order to be eligible for a payout, you’ll need a doctor’s diagnosis confirming that you have 6 to 12 months left to live.
This can provide some financial relief during a difficult time. Since this is an advance on your death benefit, the amount paid out in advance is generally deducted from the death benefit that is paid to your beneficiary(s).
End-of-life care can be expensive, but with ADB insurance, you can have peace of mind knowing that your loved ones will be taken care of financially.
Whether it’s hospice care, living in a nursing home, or hiring a private caretaker, your ADB policy can help cover the costs.
And because the funds don’t have to be used for care, you can use them for anything that will make your final days as comfortable and enjoyable as possible.
Generally, ADB funds are paid out on an as-needed basis rather than a lump sum and total payments can be as high as 80% of your death benefit.
Critical Illness Rider
Similar to the Accelerated Death Benefit rider, the Critical Illness rider pays out a lump sum if you are diagnosed with a critical illness such as cancer, stroke, heart attack, kidney failure, or ALS. The benefit is an advance that is paid to the insured and then subsequently deducted from the policy’s death benefit when you die.
Similar to the Critical Illness Rider, the Chronic Illness Rider pays out an advance on your death benefit to help the insured who cannot perform at least two of the six ADLs – bathing, eating, dressing, transferring and continence, and going to the bathroom.
Long-Term Care Rider (LTC)
The long-term care rider, available from many insurers, pays out an advance on your death benefit to help pay for long-term care expenses. When long-term care coverage is added to your whole life insurance policy, the additional coverage is referred to as hybrid long-term care insurance.
The LTC rider can be pricey but the cost is much lower than a stand-alone long-term care policy, especially when you purchase it as a young adult.
your death benefit.
Accidental Death Benefit
This rider is typically considered a no-brainer since it is very inexpensive. The accidental death benefit rider provides an additional death over and above the standard death benefit in your policy if your death is the result of an accident. Some riders also cover dismemberment, with a specified cash benefit paid out depending on the severity of the injury.
Disability Waiver of Premium
The disability waiver of premium rider should seriously be considered if you’re still working. With this rider, your insurance premiums will be waived if you become disabled and cannot work thus, preserving your important life insurance coverage.
Guaranteed Insurability Option
With a Guaranteed Insurability Option (GIO), you’re guaranteed to be able to increase your whole life insurance coverage on certain birthdays with the need for medical underwriting. This gives you greater peace of mind, knowing that you’ll always be covered. And because you can make this choice up to 9 times (depending on the company), you have complete control over your coverage.
Enhanced Blended Insurance Rider
With an Enhanced Blended Insurance Rider (EBIR) on your policy, you can leave a stronger legacy to your heirs. This rider allows you to purchase an additional death benefit with your dividends and an extra premium. So your loved ones will be financially taken care of even after you’re gone.
The additional death benefit consists of a one-year term life insurance policy and paid-up additions. The one-year term life insurance policy will gradually decrease over time as dividends and premiums are paid. The paid-up additions portion will increase over time. If the crossover age is reached the death benefit rises.
Children's Benefit Rider (CBR)
Children are the light of our lives, and no parent wants to think about what would happen financially if they lost a child. Life insurance is one way to help ease that burden, and many policies offer a children’s benefit rider.
This rider typically costs the same regardless of how many children you have, and it can insure each child up to $20,000. So even in the darkest of times, your family will have one less worry.
With most insurers, children are covered under this rider until they turn 22 years old, or until the primary insured turns 65 years old- whichever comes first. At the age of 22, children can then convert their policy to whole life insurance, which will be up to five times the amount of the Children’s Benefit Rider.
Are Insurance Riders Worth the Additional Premium
The value of any rider you consider will depend on your circumstances and your financial situation. All of them, however, bring considerably more value to your life insurance coverage and can provide additional living benefits for you and your loved ones.
The best way to learn which rider is best suited for you and whether the benefit outweighs the additional premium is to discuss each rider with an experienced insurance professional most of which will offer life examples from other clients on how an option rider or riders made a significant financial difference in the life of their client.
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