What is a life insurance rider?

Riders are add-ons to a life insurance policy. Some riders offer supplemental coverage for family members, some allow policyholders to access the death benefit before they die if they meet certain criteria, and some allow policyholders to change their benefit structure.

Some life insurance riders are common enough that most providers will either include them in the policy automatically or won’t increase the policyholder's premiums if they opt to add them. Other riders come with an added cost to the monthly premiums. The pricing may vary depending on the insurance company, the policyholder's health, the state they live in, and the amount of coverage they buy through the rider. 

What are the types of life insurance riders?

Most riders fall into one of five categories. For some categories, a standalone insurance policy is often going to offer more coverage than a rider will, but some add-ons might be worth the additional cost, depending on the policyholder's needs. The five types of life insurance riders a proposed insured can choose from are:

  • Accelerated death benefit insurance riders

  • Critical illness insurance riders

  • Family insurance riders

  • Accidental death and dismemberment insurance riders

  • Benefit structure insurance riders

Accelerated death benefit insurance riders

Accelerated death benefit insurance riders (ADB) take money from the death benefit to pay the policyholder's medical expenses if they have a terminal illness. The policyholder will need a doctor's diagnosis to confirm that they're terminally ill and have 6 to 12 months to live in order to be eligible for a payout.

ADB riders can cover end-of-life care such as hospice care, living in a nursing home, or hiring a private caretaker. But the funds don’t have to be used for care. Some insurers even suggest that policyholders use the living benefit to pay for a vacation or anything that can make their final days as easy and enjoyable as possible. These benefits are paid out as needed instead of in a lump sum. The amount the policyholder receives can vary, but it can be as high as 80% of the death benefit.

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Critical illness insurance riders

Critical illness insurance riders pay out accelerated benefits while the policyholder is alive to cover treatment for certain illnesses that are specified in their policy, which could include a heart attack, cancer, stroke, kidney failure, ALS, and other critical conditions that could limit their life expectancy and leave them with unaffordable medical bills.

The money for the payout is taken out of the death benefit and is disbursed as a lump sum. If the policyholder dies, their beneficiaries will receive whatever is left of the death benefit when they file a claim on the policy. There are a few types of critical illness riders:

Chronic illness insurance rider

Chronic illness riders pay out accelerated benefits while the policyholder is still alive if they are no longer able to perform at least two of the six activities of daily living (ADLs) — eating, bathing, getting dressed, toileting, transferring, and continence.

Long-term care (LTC) insurance rider

A traditional life insurance policy with a long-term care (LTC) rider is called a hybrid long-term care policy. The rider will pay out the policyholder's death benefit for long-term care while they're alive if they can no longer perform two of the six activities of daily living. Adding LTC coverage often comes at a high additional cost and is priced based on the policyholder's health at the time of purchase, not a flat fee like some other riders.

Waiver of premium for disability insurance rider

A waiver of premium insurance rider waives the policyholder's life insurance premium payments if they become disabled and can no longer work. This rider can add $10 to $50 per month to one's premiums.

Family insurance riders

Family insurance riders offer additional coverage for members of the policyholder's family, like their children or their spouse. The two types are:

Spousal insurance rider

If the policyholder doesn't have a separate policy for their spouse, a spousal income rider ensures that if their spouse dies they will receive a death benefit. Spousal coverage, either through a rider or separate policy, is important even if the spouse doesn’t earn an income or isn’t the primary breadwinner, because you'll still have to cover the costs of household labor they do, like childcare. While a spouse rider may cost less than a separate policy, it may also provide less coverage.

Child insurance rider

A child insurance rider provides a death benefit if the insured's child passes away. While most children don’t need life insurance, a child insurance rider can cover funeral costs for grieving parents or secure coverage for children with medical conditions that might make getting a policy more difficult when they’re older. Most child insurance riders can be converted into permanent insurance policies once the child enters adulthood. On average, child insurance riders cost an additional $5.60 per month.

Accidental death and dismemberment insurance riders

Accidental death and dismemberment insurance riders are for people who have riskier lifestyles, such as a dangerous job or hobby that will increase their premium. The AD&D rider pays the insured money from the death benefit if they lose a limb or digit in an accident. If they die, it pays out to their beneficiaries. Because of the strict parameters under which the death or injury must occur to get a payout, an accidental death and dismemberment insurance rider usually isn’t worth the cost.

Benefit structure insurance riders

While long-term care riders help the policyholder manage unexpected illness or disability, benefit structure insurance riders trigger adjustments to the policy itself. Benefit structure insurance riders include:

Return-of-premium insurance rider

The return-of-premium insurance rider ensures that if the insured outlives their life insurance policy, they'll be refunded any premiums that they paid toward the policy. The refund is tax-free and some people use it as a forced savings vehicle, but these riders are expensive and might not be a worthwhile add-on. Premiums are higher than for a standard term life policy and won’t earn interest like savings one would put in a bank or investment account.

Term conversion insurance rider

Term conversion riders are included in most term life insurance policies. These riders allow the policyholder to convert their term policy into whole life insurance when their policy expires. This can be useful for older adults who want to maintain some life insurance coverage when their policy’s term is set to expire, but don’t want to go through underwriting again to get a brand new policy.

Family income rider

A family income rider adjusts how the death benefit will be paid out to the insured's family if they die while the policy is active. With this rider, instead of one lump sum, the policy pays out part of the death benefit in monthly installments, like an income. Some insurers also sell standalone family income policies if the insured wants their entire death benefit handled this way. The pricing varies based on the amount of additional coverage the insured buys. If they think their beneficiary would be better off receiving some of the death benefit in smaller, predictable chunks rather than one large lump sum, this rider creates that payout structure.

Guaranteed insurability rider

The guaranteed insurability rider allows the policyholder to increase the size of their death benefit at specific life milestones. The "option dates" when they can buy more coverage vary but usually occur every three or five years from the day the policy went in force and within 30 to 90 days of a major life event, such as getting married or having a baby. They will have to pay more for the increase in coverage, but they won’t have to go through underwriting or take a new medical exam before their policy's cutoff age, which is usually between age 40 and 50. After that, they can still add coverage, but they'll have to take a medical exam.

Guaranteed insurability riders are not offered for every life insurance policy, and are most commonly added on to whole life insurance policies. Guaranteed insurability riders can be as low as an additional $3 to $5 per month. Most people don’t need a guaranteed insurability rider because they need less life insurance as they get older and their health won’t worsen significantly before age 40 to 50. The rider is best used by people who have a chronic illness or other condition that may worsen, a family history of serious illness that could affect them before age 45, or want a permanent policy and plan to increase their coverage in the future.

Are life insurance riders worth it?

Not all life insurance riders are created equal. While some can add extra value to a policyholder's life insurance policy, others cost more than they're worth.

For example, a term conversion insurance rider extends an insured's coverage and is a worthwhile add-on because it comes at no additional cost. A waiver of premium rider, on the other hand, is costly and doesn't actually save the insured money based on the interest they're losing out on if they invested the cost of rider, so it’s often not worth the extra money. 

Whether or not a life insurance rider is worth it depends on the insured's specific needs and largely depends on their specific financial and personal situation. If they don’t want to pay for a separate policy like AD&D or disability insurance, a rider offers some of the same protections at a potentially lower cost. Or, if they think their child will have difficulty getting life insurance coverage in the future, then a child rider may make sense for them.


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