What is a Life Insurance Rider?
A life insurance rider is an add-on that expands the insurance policy’s benefit. Some policies offer some of these customization options at no added cost, while others require a slight increase in premiums. Riders — and their costs — vary between policies and insurers.
How life insurance riders work
Life insurance riders expand the benefits you get from your life insurance policy. When you buy life insurance, you can understand your options by reviewing the free and added-cost riders that specific insurance company offers for the policy type you’re purchasing.
If you choose a rider or multiple riders that cost extra, the insurance company will roll that added cost into your premium. In other words, your billing cycle shouldn’t change at all. And while some riders do increase premiums, they usually do so by an amount that’s small relative to the cost of the policy.
Then, you’ll usually need some qualifying event to occur to call on the additional protection the rider offers. In the same way your passing away will trigger the death benefit payout for your beneficiaries, life insurance riders usually have a triggering event before their benefit gets activated.
Types of life insurance riders
Again, riders vary from insurer to insurer. But there are some relatively commonplace options, including:
- Accelerated death benefit rider. This rider allows you to use some of your death benefit if you get diagnosed with a terminal illness. Most accelerated death benefit riders specify a certain percentage of your overall death benefit that you can receive if diagnosed with a qualifying illness. You can then use that money however you want, whether that’s for live-in care, treatments your health insurance doesn’t cover, or something else.
- Waiver of premium rider. This rider kicks in if you get permanently, totally disabled. It can be a lifeline if you’re unable to work but want to maintain your life insurance policy to leave your beneficiaries something after you’re gone — especially when you no longer have an income to save up.
- Return of premium rider. These term life insurance riders stipulate that if you outlive your policy’s level-premium term (at which point the premiums will inflate dramatically), your insurance company will refund some or all of the premiums you paid back to you. Unlike many other riders on this list, this one comes with a hefty cost. Your premiums could double or triple with this option added to your policy.
- Long-term care rider. This alternative to stand-alone long-term care insurance helps to pay for the cost of a nursing home or at-home healthcare. It requires a qualifying diagnosis to activate, usually in the form of an authorized person confirming that you can no longer handle the activities of daily living (ADLs) on your own. The benefit usually comes in the form of monthly payments to you or reimbursements for long-term care costs you incur. Either way, this money gets pulled from your death benefit.
- Critical illness rider. Much like the long-term care rider, this add-on option kicks in when you’re diagnosed with a qualifying critical illness. With it, you can use some of your death benefit to help pay for additional care you need.
- Guaranteed insurability rider. This rider lets you buy additional coverage (i.e., a larger death benefit) without undergoing an additional medical exam. This can be helpful if your circumstances change, e.g., you have a baby or get a big raise.
- Child term rider. If you want life insurance for your children, you can potentially get a rider to cover them rather than purchasing a separate policy for each child. In most cases, these term riders expire when your child reaches a certain age and offers a relatively low death benefit.
Riders give you life insurance customization options, usually for less cost than buying these protections as standalone insurance policies.