What Is a Life Insurance Rider?

Types of Life Insurance Policies

There are two main types of life insurance to choose from: term and permanent. Permanent life insurance is available as either whole life or universal life insurance, which can also come in various forms.

If that sounds complicated, here's a quick summary of each option:

• Term life insurance: With term insurance, your policy is good for a set term, such as five, 10, 20, 30 or 40 years. Your premium stays the same throughout the life of the policy, and you keep your coverage for the entire term of your policy as long as you make your premium payments. Once the term ends, you lose your coverage unless you renew the policy or purchase a new one. Term coverage is the best option for most people because it's relatively inexpensive.
• Whole life insurance: Whole life insurance has an insurance component and a cash value component. You'll make fixed monthly premium payments, and a portion of what you pay goes into a cash value account that grows at a low but guaranteed rate. Some people purchase whole life insurance as a supplement to their retirement savings. However, they're far more expensive than term life policies.
• Universal life insurance: Similar to whole life, universal life insurance policies have an insurance portion and a cash value portion. The difference is that you get a little more flexibility. For example, if you've built up enough cash value with your policy, you can use it to pay your premiums. You can also adjust your premiums and death benefit at will, as long as the premiums you pay are enough to cover the policy's minimum cost requirements.

Note that unlike term policies, whole and universal policies typically last for as long as you live.

How Do Life Insurance Riders Work?

Life insurance can provide a lot of value, but because every situation is different, a basic policy may be good enough for some people but not for others.

This is where life insurance riders come in. The supplemental coverage can help you customize your policy to ensure that it meets your needs. In some cases, it may be worth purchasing a life insurance rider to anticipate potential issues that may arise in the future, such as a disability or terminal illness.

As you consider how much life insurance you need and whether you should add a rider to your policy, it's a good idea to speak with a licensed insurance agent to receive personalized advice for your situation.

Common Types of Life Insurance Riders

During the purchase process, it's important to think about what you want your life insurance policy to do for you. Here are some common life insurance riders to consider as you shop around:

• Accelerated death benefit: If you become terminally ill, this rider allows you to tap your death benefit to cover your immediate expenses related to your illness. Depending on the insurance carrier, that can include things like hospice care, a private caretaker or a nursing home.
• Child term: Children generally don't need life insurance. But if you'd like a little coverage to cover the cost of a funeral and burial, or your child has health issues that could make it difficult for them to get coverage later in life, adding a child term rider to your policy can make a big difference. This rider provides an additional death benefit for your child, and one single rider can cover every child in your household.
• Critical illness: Similar to an accelerated death benefit rider, a critical illness rider allows you to use some of your death benefit while you're still alive. The difference is that this rider covers potentially life-threatening conditions that aren't necessarily terminal but may shorten your lifespan.
• Disability rider: If you become permanently disabled and can no longer work, this rider kicks in and waives your policy's premiums. In some cases, the insurer may even convert your policy to a permanent policy so you can keep it for life.
• Guaranteed insurability rider: In most cases, purchasing life insurance typically requires a medical exam. While there are no-exam policies available for people with health issues that would make it impossible to pass an exam, it can be expensive. With the guaranteed insurability rider, you can purchase additional coverage within a predetermined period without having to take another medical exam. This can be helpful if you develop health issues after your policy is already in place.
• Return of premium rider: If you have a term life insurance policy and don't die during the policy's term, you get all of your premiums back when it expires.

Are Life Insurance Riders Worth It?

Life insurance riders can add a lot of value on top of a basic life insurance policy. Depending on your situation, your budget and your needs, it may be worth it to add one or more to your policy. But because riders typically address situations that may or may not happen, it's important to compare the cost to the potential benefits.

You'll also want to read the fine print to determine what it takes to qualify to use a rider. For example, what you think might qualify you for an accelerated death benefit may not be the same as what the insurance company thinks.

Finally, it's important to note that riders may not offer all the coverage that you need. For example, a disability rider can be beneficial because it waives your premiums, but it won't provide any income like a disability insurance policy.

Before you add a rider to your life insurance policy, carefully consider your situation and needs. Also, speak to a licensed agent who can help you find the right strategy for you.

Make Adjustments as Needed

Life insurance policies can last for decades, but that doesn't mean you're stuck with what you choose when you buy a policy. If your situation and needs change, you may not be able to add a rider to a policy that's already in force. But you can purchase an additional policy and add the riders that you need. You can even cancel your existing policy and replace it with a different one that better meets your needs.