Life insurance riders are additional benefits that can be added on to a policy to best suit the owner’s needs. Here are a few different kinds of riders and how they may help in a variety of situations:
Disability Riders
Disability riders are a common type of life insurance riders. Within this broader category, there are different variations. For instance, a waiver of premium rider will pay the premiums so that the policyholder can have coverage for the duration of the policy, if for any reason they become disabled. Another example is the disability income rider, which provides the policyholder with a monthly benefit check if they become disabled (The benefit can vary depending on the life insurance policy death benefit).
Other (Additional) Insured Term Riders
Other insured term riders provide insurance for a spouse of an immediate family member of the primary person who is insured. Other insured riders can also be bought for people who are not direct family, including business associates.
Exchange Privilege (Substitute Insured) Riders
This type of rider is used to change the person who is insured. The exchange privilege rider is often used when the business owns the policy and the insured is a key employee. If the key employee leaves the company, the business will switch the insured to another employee.
Term Rider on the Insured
Should the insured die, the term insurance rider and the insurance policy’s death benefit would be paid to the designated beneficiary. This type of rider is added to a permanent policy, but has a lower premium than starting a separate policy.
Accelerated Benefits Rider
This type of rider allows the policyholder to apply to receive the death benefit proceeds while the insured is still living. The insured must have a limited life expectancy at this time or meet certain medical circumstances in order to be eligible. Such circumstances include a terminal illness, a serious illness that lowers life expectancy (such as cancer), admittance into hospice care, inability to perform activities associated with daily living, or an illness requiring extensive treatment (such as an organ transplant). Accelerated death benefit payments range anywhere between 25-100% of the death benefit, depending on the policy.
Long-Term Care (LTC) Rider
Like the accelerated benefits rider, the LTC rider allows the insured to use a portion of their life insurance benefit while they are still living in order to pay for long-term care, whether that be assisted living facilities, private nurses, etc. In this way, the LTC rider offers benefits that are similar to a stand-alone long-term care policy.
These are just a few different types of riders you may want to consider adding to your life insurance policy. An advisor can help you decide which riders may be of most benefit to you, your family, or your business.
