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