Life insurance policies are packaged by insurance companies to offer financial protection to policyholders and their loved one. Whole life insurance is one of the most prominent life insurance policies due to its numerous benefits. However, not all whole life policies might be suitable for your family’s needs as well as your financial goals. There are windows through which extra features can be added in order to personalize your life insurance policy. One such means is through the Whole life insurance riders. That is why, in this article, we shall discuss what life insurance riders are and their various types. Let’s dig in!
What are Life Insurance Riders?
Life insurance riders are add-on benefits that can be procured to buffer the traditional life insurance policy. They are cool features that you can buy and add to your existing policy, which may give you access to your death benefits before you pass away. Riders are primarily bought to provide an extra layer of protection tailored to meet your specific needs.
Below are some of the benefits life insurance riders can offer policyholders:
- They transform a term life policy into a permanent life policy.
- Riders offer you the opportunity to access your death benefit in case you become terminally ill.
- They also give you the liberty to use your death benefit to cover long-term care.
- Riders can help you provide a limited life insurance policy for your better half.
Despite all the benefits life insurance riders offer, you must be aware that some of them come at an extra cost to your insurance premium. Therefore, it is advisable to be aware of all possible riders and their related extra charges.
Types of Whole Life Insurance Riders
To help you choose the suitable rider for your family’s needs and financial goals, here are the various types of riders you can choose from:
- Accidental Death Rider
This life insurance rider pays out an extra amount of death benefit in the event that the policyholder dies by accident before the terminal date of the policy. The biggest plus of this type of rider is that the beneficiaries usually get paid double the original death benefit. Another name for this rider is a double indemnity rider.
- Guaranteed Insurability Rider
A guaranteed insurability rider is a type that enables you to buy extra insurance coverage within a stipulated period during which you wouldn’t have to undergo additional medical exams. This is a perfect choice when your life circumstances have taken a significant turn. For instance, the change in circumstances may be due to the birth of a new child, marriage, or a surge in income level. Even if your health deteriorates as a result of aging, you can still get additional coverage without providing further medical reports.
- Family Income Benefit Rider
Under this rider, when the policyholder passes away, the dependent family gets paid a constant flow of income. The insured is expected to specify the number of years the beneficiaries will receive the income. The main objective of this rider is to protect your family members from financial trauma after your demise. It is perfect for a young parent with a number of dependents.
- Waiver of Premium Rider
When the breadwinner of a family becomes incapacitated, the effect can be far-reaching for the family members. Therefore, the waiver of the premium rider allows the insurance company to waive future premiums payable in the event that the breadwinner becomes terminally ill or becomes disabled due to injury.
- Accelerated Death benefit Rider
With an accelerated death benefit rider, a policyholder is allowed to utilize the existing death benefit if diagnosed with a life-threatening ailment that is capable of shortening their lifespan. Most of the time, insurance companies usually pay an upfront percentage of the total death benefit.
How to Buy Riders
Life insurance riders are normally offered for sale at the time of purchasing insurance coverage. It is ideal that you pick a rider from the list provided by your insurer at the time of buying the base Whole life insurance policy. Note that insurance riders cannot be bought after the main policy has been acquired. Always ask your insurer whether they offer in-built riders or a more flexible variant.
How to Select an Accidental Death Benefit Rider
Specifically, you need to consider the following factors before picking an accidental death benefit rider:
- Age
Young people tend to be more exposed to accidents given their adventurous nature and youthful exuberance. Nobody can ascertain the timing and extent of the impact of accidents. Therefore, as a young individual, adding an accidental death benefit rider to your life insurance policy is a way of preparing for unsolicited occurrences.
- Income
This is an important factor worthy of consideration when shopping for any insurance product. Ideally, you are expected to add the accidental death benefit to your life insurance coverage, but you must pay attention to the financial implications of the required additional premium. On the other hand, taking the rider off your base policy may lead to economic hardship for your loved ones in the event of an eventuality. So, ensure you strike the balance when buying a life insurance policy with the riders.
- Risk
Life is full of uncertainties, and each individual faces different levels of risk. If your risk exposure is high due to your occupation or hobbies, your insurer may not allow you to add an accidental death benefit rider to your base coverage. It is therefore pertinent to give due consideration to the amount of risk to your life before subscribing to any accidental death benefit rider.
Parting Thoughts
Life insurance riders are extra benefits meant to be added to the base life insurance policy at the time of purchase. These extra benefits usually come at an extra cost to the base insurance premium. There are several types of riders that you may want to consider, such as accidental death benefit, family income benefit, waiver of premium, and guaranteed insurability rider. It is advisable to always consider your age, risk, and income when deciding whether or not to opt for a rider.
