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What are Riders for Life Insurance?
A rider for a life insurance policy is a provision added to the policy that helps you customize your coverage to make it best fit your life insurance needs.
The rider provides additional benefits that the basic life insurance policy does not provide. Some riders you need to pay for, some are included in your policy at no additional cost.
Life Insurance Riders for No Additional Cost
Here are some riders for life insurance that are typically included with term life insurance policies without any additional costs:
Accelerated Death Benefit Rider:
Life insurance is meant to pay out a specified amount of money to your loved ones (beneficiary) in the event of your death.
But what happens if you become terminally ill, and it’s you who needs money for to pay for your medical bills, or other living expenses, especially if you can no longer work due to your illness?
This rider, which is usually included in term life insurance policies, allows you to receive a part of your life insurance policy death benefit if you become terminally ill.
For example, if a physician determines you have less than 12 months to live, you may be able to get up to 75% of the death benefit, up to a certain maximum dollar amount. But keep in mind that every life insurance company’s guidelines are different.
Term Conversion Option:
With this life insurance rider, you have the right to convert your term life insurance policy to a permanent life insurance policy within a specific time period.
Each life insurance company has different rules regarding when you are eligible to convert your policy to permanent coverage, but having a term conversion option is a major advantage because you can convert the term insurance policy without a new medical exam and your rate is determined based on the health rating you got when you purchased the term life policy, not your current health.
That means that if you have a term policy and your health deteriorates, you may want to convert the life insurance policy so that it doesn’t expire and leave you with limited options for getting new life insurance coverage.
Life Insurance Riders for Additional Cost
There are other riders that you can add to customize your life insurance policy, but that come at an addition cost. These include:
Accidental Death Benefit Rider:
When you purchase a regular life insurance policy, the death benefit covers you for "any cause of death."
This means that whether you die from natural causes, disease, injury or accident, you’re covered, and your beneficiaries will receive a death benefit from your life insurance policy.
An accidental death benefit rider allows you to increase the death benefit on your life insurance policy in case you die as a result of an accident or injury (typically you must die within 90 days of the accident or injury to qualify for this benefit).
You can usually double your life insurance coverage in case of accidental death with this rider, up to an additional $250,000-$500,000 depending on the life insurance company.
Child Insurance Benefit Rider:
This allows you to add life insurance coverage for your child or children.
Typically children between 15 days and 18 years of age are eligible to be added to your life insurance policy, and coverage on your child expires between ages 21-25, depending on the life insurance company.
This rider usually allows anywhere from $1,000 to $25,000 of coverage per child to be added to your life insurance policy.
Although no parent wants to go through losing and burying a child, this additional life insurance coverage is very inexpensive.
So if you have young children and not much in savings to cover the cost of burial and funeral expenses, this rider can help with final expenses, should the unexpected happen.
Waiver of Premium Rider:
This would protect you in case you get disabled. If you have this rider on your policy, the life insurance company would continue to pay your life insurance policy premiums for you as long as you are disabled.
This is a rider that you need to qualify for, which would depend on your occupation and health.
If you are buying a large life insurance policy that has a premium that you will only be able to afford if you are earning the income you are used to, you may want to consider adding this rider to your policy.
Return of Premium Rider:
The most "expensive" term life insurance rider is the return of premium rider. With this rider, if you outlive the term (duration) of your term life policy, you get back all the premiums you paid.
For example, if you buy a 10-year term life policy and you live past the 10 years, you will get back all premiums you paid for your policy. While this sounds great, having this rider will significantly increase the cost of your term life insurance policy.
Let’s take a look at an example. If a 35-year-old buys a $200,000 10-year term policy with return of premium, the policy may cost around $400 per year. At the end of 10 years you would get back $4,000.
What is the Cost of a Rider for Life Insurance?
For example, a 40-year-old male applying for a 10-year $200,000 term life insurance policy (at preferred plus non-tobacco rates).
Keep in mind, these numbers are a guide, not set rates. The annual cost of the main term life insurance policy would be about $150 per year. A $10,000 child rider would cost an additional $40 a year. A waiver of premium rider would cost less than $25 a year.
An accidental death benefit rider would cost between about $1250-$200 a year, depending on the life insurance company.
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