What is a Rider on a Life Insurance Policy?

Probably the most popular form of life insurance today, Term Life Insurance is heavily advertised by all the major players because of its affordable rates. This is the perfect product for young, growing families who may be creating a lot of debt.

Since the policyholder is paying only for the cost of insurance for a set period of time, Term Life Insurance is the most affordable way to make certain the funds will be available to accommodate a mortgage balance, household debt, college tuition, monthly expenses, and final expenses.

Your Term Insurance does not have to be a cookie-cutter policy that only addresses a death benefit. There are riders (coverage options) that can be added to your policy that will broaden your coverage and even offer living benefits. Here we will look at the most popular riders that add LIVING BENEFITS to a term policy that ordinarily only has a death benefit.

Accelerated Death Benefit

According to INVESTOPEDIA, an online source for all types of insurance products, they explain accelerated death benefit as:

An accelerated death benefit (ADB) is a benefit that can be attached to a life insurance policy that enables the policy holder to receive cash advances against the death benefit in the case of being diagnosed with a terminal illness. Many individuals who choose the accelerated death benefit have less than one year to live and use the money for treatments and other costs needed to stay alive.

Choosing an insurance policy with an accelerated death benefit allows the policyholder to pay for their daily living in an effort to make it the most comfortable while also allowing the holder to look after his or her family once they pass away.

This type of benefit was originally started in the late 1980s in an attempt to alleviate the financial pressures of those that were diagnosed with AIDS. Some policies might have this option available even though it’s not mentioned in the contract.

Long Term Care Rider (LTC)

A very affordable method of turning a death benefit into a living benefit is to select the Long-Term Care Rider.

According to the folks at ThinkAdvisor.com:

Return of Premium Rider

Although the return of premium rider carries an additional charge to your monthly premiums (30 – 50%) it is perfect for individuals who are challenged when it comes to consistent savings or think of term insurance as renting a death benefit.

In an instructive article about the Return of Premium Rider, MOOLANOMY discusses the good and not so good aspects of the rider:

Add Living Benefits to Broaden Your Coverage

Here we have discussed the three most popular insurance riders that will add living benefits to a policy designed to pay a death benefit only. But there are more riders available to you that can help turn your simple Term policy into a family plan.

Children’s Term Rider

This rider allows the insured to add all unmarried children in the household to the insurance policy and will offer automatic coverage for any children born or adopted in the future.

Additional Insured Rider

This rider allows the insured to add an additional insured, such as a spouse to the policy with a maximum limit of the insured’s death benefit.

The Bottom Line

Since most riders on a life insurance policy are inexpensive and in some cases, free, it makes good financial sense to broaden your coverage and add living benefits insurance riders.

Ask your agent to fill you in on riders that are available for a policy you are considering so you can customize your policy to meet your needs and circumstances.