A rider is a provision added to a policy that changes or expands what it does. Some are included at no additional cost, some carry a premium, and some can only be added when the policy is issued rather than later.
The Insurance Information Institute singles out two as worth considering for most buyers: waiver of premium and guaranteed insurability. Several others come up often enough to be worth knowing.
Accelerated death benefit
An accelerated death benefit, sometimes called a living benefit, lets the policy owner receive part of the death benefit early if the insured is diagnosed with a qualifying condition, commonly a terminal illness and in some contracts a chronic illness or permanent nursing home confinement. Many newer policies include a provision of this kind without a separate charge.
The NAIC's model regulation on accelerated benefits sets out several features that matter to a consumer:
- It reduces the death benefit. Money paid out early is not paid again at death. This is a change in timing, not additional coverage.
- A lump sum option must be offered among the payment options.
- Interest may accrue on the accelerated amount, based on actuarial principles and disclosed in the contract.
- Tax disclosure is required at application and again when acceleration is requested, because receiving these benefits may be taxable depending on the circumstances.
- It is not long-term care insurance and may not be marketed as such.
- An irrevocable beneficiary or assignee must consent before an accelerated benefit is paid.
The money generally does not have to be spent on care related to the illness. What triggers eligibility, and how much of the benefit may be accelerated, are contract terms that differ substantially between insurers.
Waiver of premium
A waiver of premium rider stops your obligation to pay premiums if you become disabled as the rider defines disability, keeping the policy in force.
The details are where the value lives:
- How disability is defined. Some riders require inability to perform your own occupation, others any occupation. The difference is large.
- The waiting period before premiums are waived, which is commonly several months.
- Whether the waiver ends at a certain age.
- What documentation and ongoing proof is required.
There is a related provision worth asking about separately: an insurer may offer a waiver of premium specific to the accelerated benefit provision, even where the policy has no general waiver of premium rider. At claim time the insurer must explain any continuing premium requirement needed to keep the policy in force.
Guaranteed insurability
A guaranteed insurability rider lets you increase the death benefit at specified future dates or after specified life events, without new evidence of insurability.
The cost of each increase is based on your age at the time and the amount added, not on your health or lifestyle then. That is the entire point: it preserves your ability to buy more coverage even if your health changes.
Typical structures allow increases at set policy anniversaries, or on events such as marriage or the birth of a child, up to a maximum. Because it must generally be added at issue, it is one of the riders to think about before the policy is written rather than after.
Term conversion
On a term policy, a conversion privilege lets you exchange the policy for a permanent one without new underwriting. It is technically a policy provision rather than always a separate rider, but it functions the same way from a buyer's perspective.
What to check:
- The deadline, which is usually the earlier of a stated policy year or a stated age
- Which permanent products you may convert into, since the list may be narrower than the insurer's full catalog
- Whether the original rate class carries over to the new policy
- Whether partial conversion is allowed, so you can convert part of the coverage and let the rest run out
Conversion is the feature that turns a term policy into an option rather than only a period of coverage, and it is easy to let the deadline pass unnoticed.
Riders that pay more, or pay someone else
Accidental death benefit, sometimes called double or triple indemnity, pays an additional amount if death results from an accident as the rider defines it. The definition is narrower than most people assume, and typically includes time limits between the accident and the death plus exclusions for various causes. Note that this benefit is not affected by payment of an accelerated benefit.
Child rider, providing a small amount of coverage on the insured's children, often with a right for the child to convert to their own policy later without evidence of insurability. That conversion right is frequently the more valuable half.
Spouse or other insured rider, adding coverage on another person under the same policy.
Return of premium, on some term policies, refunding premiums if the insured survives the term. It raises the premium substantially in exchange.
Long-term care rider, letting you use part of the death benefit for qualifying long-term care expenses, usually with limits on how much may be used and which kinds of care qualify. It is not the same product as standalone long-term care insurance and the differences are worth a direct conversation.
Questions to ask before adding one
- What does this cost, and is the charge level or increasing?
- What exactly triggers it? Ask for the contract definition, not the brochure summary.
- What does it reduce? Accelerated benefits and loans both reduce what beneficiaries receive.
- When does it expire? Many riders terminate at a stated age or when the base policy changes. An accelerated death benefit offered with a term policy terminates when the term policy does, and notice of that is required.
- Can it be added later, or only at issue?
- Is there an equivalent standalone product? Sometimes separate coverage does the job better, and sometimes the rider is far simpler.
Do not over-buy
Riders are useful when they solve a problem you actually have. A policy loaded with riders costs more, and some of them duplicate coverage you already hold, such as disability income insurance or a separate long-term care policy.
The two the III highlights, waiver of premium and guaranteed insurability, address risks specific to life insurance itself: losing the ability to pay, and losing the ability to qualify. Those are hard to solve any other way. Most of the rest are worth evaluating one at a time against what they cost.
Rider availability, definitions, charges and state approval vary by insurer and by state, and the policy documents control. For your own situation, talk to a licensed agent, the issuing insurer, or your state Department of Insurance.
To get connected with licensed carriers and agents who write life insurance in your state, you can request life insurance quotes.