Adding Riders

Many companies allow you to customize any type of life insurance with riders or added clauses to include additional benefits or payouts under specific circumstances. Some policies may include features of these riders as part of the policy. Any other rider you want will need to be added and will increase your premiums.

  • Before adding a rider, make sure you can afford the additional premium and can reasonably expect to need it.
  • An added rider may be more cost effective than a stand-alone policy for the specified coverage depending on the amount of the death benefit and any expenses paid for by the rider.
  • Payouts from riders that are not related to your death such as a disability rider are deducted from the death benefit, as opposed to a stand-alone policy.

Most riders can only be added at certain times. For example, a waiver of premium riders needs to be added when the policy is purchased while an accelerated death rider could be added when you are diagnosed with a terminal illness. For the most part, you can drop a rider from your policy simply by filling out a form to authorize its removal.

Accelerated Death Benefits Rider

An accelerated death benefits (ADB) rider allows you to collect a portion or all of your death benefit if you have been diagnosed with a terminal illness. It is described in detail in the Collecting from Life Insurance Before Death section below.

Accidental Death Benefit Rider

An accidental death benefit rider provides an additional payout if your death is proved to be accidental, usually an amount equal to the death benefit. It may be called a double indemnity rider.

You must request this rider and it will increase the cost of your premium.

  • Most deaths are not caused by events considered by insurance companies to be accidents, so this rider may not be for everyone. You may end up paying a lot of money for a benefit you are unlikely to receive. 
  • Consider one if you work in or around potentially hazardous environments or drive a lot, either professionally or as a commuter.
  • Although different for each company, deaths are typically considered accidental if they result from car accidents, inadvertent falls, choking, drowning, machinery, and any other uncontrolled events.
  • Deaths are not considered accidents if they are caused by acts of war, illegal activities, an illness, or any hazardous hobbies such as race car driving, bungee jumping, rock climbing, or any other similar activity.
  • The policy will usually state a maximum amount of time between the accident and your death if the accident ultimately resulted in your death. Some companies will pay up to a year after the initial accident.

These riders may be available on insurance through your employer.

These riders are usually removed when you reach 70 years old.

Critical illness insurance riders

Critical illness insurance riders pay out accelerated benefits during your lifetime to cover treatment for certain illnesses specified in your policy, such as a heart attack, cancer, stroke, kidney failure, ALS, and other critical conditions that could limit your life expectancy and result in unaffordable medical bills.

The payout is taken out of your death benefit and is paid out as a lump sum. If you die, your beneficiaries will receive whatever is left of the death benefit when they file a claim on your policy.

There are a few types of critical illness riders:

  • Chronic illness insurance riders pay out accelerated benefits if you are no longer able to perform at least two of the six activities for daily living — eating, bathing, getting dressed, toileting, transferring, and continence.
  • Long-term care insurance riders offer money for long-term care if you can no longer perform two of the six activities for daily living. Long-term care riders often come at a high additional cost, but the policy will keep paying for your care even if your expenses exceed the value of your original death benefit.
  • Waiver of premium for disability insurance riders waives your life insurance policy’s premium payments if you become disabled and can no longer work. Each life insurance company has its own definition of a disability, which can make it difficult to qualify.

Disability Income Rider

A disability income rider pays you a monthly income if you become unable to work for several months or more due to a serious illness or injury. Disability insurance is probably best purchased as a stand-alone policy, since a prolonged disability can significantly diminish your death benefit. 

Family Income Benefit Rider

A family income benefit rider gives regular monthly income to your family members after you die. You must specify the number of years your family is going to receive this benefit in the rider which will determine how high the premium is.

Family Insurance Riders

Family insurance riders offer additional coverage for members of your family, like your children or your spouse. The rider provides a death benefit to you if the person named in the rider dies.

  • Spousal insurance riders pay a death benefit if your spouse dies. It’s worth considering even if your spouse doesn’t earn an income or isn’t the primary provider because you’ll still have to cover the costs of any household labor they do, like childcare.
  • Child insurance riders is a term plan that provides a death benefit if your child dies before a specified age. These can be converted into permanent insurance without the need for a medical exam. The death benefit can be up to five times the term benefit.

Long-term Care Rider

A long-term care rider provides monthly payments you have to stay at a nursing home or receive home care. A rider may be able to take care of your long-term care costs as well as a long-term care insurance policy and the cost of the rider will be less than the premium of a stand-alone policy.

No Lapse Guarantee

A no lapse guarantee keeps your death benefit will remain in place as long as you pay a minimum premium, if your account value drops — a risk for some universal life policies.

Guaranteed Insurability Rider

The guaranteed insurability rider allows you to renew or purchase additional life insurance without a new paramedical exam and without having your current health taken into account. These may need to be done before you add this rider to an existing policy. Your ability to add this rider may end at a certain age.

A common guaranteed insurability rider allows you to purchase additional life insurance even if you otherwise become uninsurable.

  • This rider is only available on permanent policies such as whole life and universal life and essentially converts your current policy into an increasing death benefit policy such as a variable universal life policy.
  • The rider can be added when you purchase your policy or at a later date when the need arises.
    • You will pay an extra premium for the rider.
    • The premium will be higher if you wait because you are older and may have more risk factors.
    • This rider can be helpful when your income increases and/or your financial obligations such as a mortgage and college tuition increase as you get older and you don’t want to take the risk of developing a condition that prevents you from doing so.
  • Your ability to increase coverage may be limited to certain predetermined times.
      • These times may include when you reach a certain age, during “option periods” which are specified intervals, typically every three to five years, or major life events such as marriage or having a baby.
      • Every time you increase your death benefits your premium will go up.
      • You may not be able to increase coverage after 40 years old.

A similar rider may be added to your term insurance policy to allow you to renew your policy at the end of its term.

Return-of-premium Rider

A return-of-premium rider can be added to a term life insurance policy so that your premiums will be returned if you outlive your policy. You may be doubling or tripling your premiums to the life insurance company on the chance that this will happen. An affordable term policy may not have a high enough death benefit and is probably not worth adding.

  • While you would get most of that money back at the end of the term, minus fees and the cost of other riders, it has not earned any interest.
  • You’d usually be better off paying low premiums and investing the extra premium cost into a retirement account or other interest-earning account.

Term Conversion Rider

A term-to-perm conversion rider allows you to transform your term life policy to whole life insurance without taking a medical exam.

This rider gives you the freedom to adapt to changes in your life. For example, if you bought a term life insurance policy with a settlement that is enough to pay off your mortgage and support your family, it may be less useful as you get older. Once the kids are all out of college and you have paid off your mortgage you may only need a whole life policy with death benefit to help with final expenses.

There’s usually a conversion deadline, so make sure you do this before it’s too late.

Term Life Rider on a Whole Life Insurance Policy

A term rider can be added to a whole life policy. Since term insurance premiums can be 10-15 times less than whole life premiums, it is a less expensive way to increase your life insurance coverage than simply increasing the death benefit of your existing whole life policy. Like term insurance, term riders cover you for a pre-designated age range or term that you determine when you add the rider. The rider does not affect the cash value of your whole life policy unless you elect to use it to pay the additional premium.

Waiver of Premium Rider

If you become critically ill, seriously injured, or totally disabled, you may become unable to keep up with premium payments and your life insurance will lapse. A waiver of premium rider waives premium payments until you are able to resume them, allowing you to use your premium money for other expenses. They are unnecessary when you have individual or group disability insurance or a disability income rider.

They can be more expensive than they are worth unless you are at high risk, and even then that risk may disqualify you from getting life insurance at all. You may be better off investing the extra cost in an interest-earning account.

  • You can usually only add this rider when you first get the policy. It may not be available in your state.
  • This rider is difficult to qualify for and is not available if you have pre-existing disabilities.
  • The conditions that trigger the waiver must fit the definitions used by your insurance company and be verified by a physician statement and a notice from the Social Security Administration (SSA) confirming the disability.
  • Other conditions may apply, such as meeting specific health and/or age requirements.
  • Most waivers contain a waiting period, i.e. you must be disabled for a specific period (typically 6 consecutive months) before the premiums waiver goes into effect.
  • This waiver often expires at age 60 or 65.

Miscellaneous Riders

Early/enhanced cash value rider

Can adjust the charges to offer higher surrender amounts if you need to surrender your life insurance policy within the first few years.

Estate protection rider

Your life insurance death benefit goes to your estate and can help offset estate taxes.

Overloan protection rider

Avoids the lapse of your policy due to excessive loan balances exceeding policy’s cash values.