The Most Common Life Insurance Riders and When You Should Get Them
Riders can add value to a life insurance policy, but may come at a cost
Life insurance helps protect your loved ones financially if you pass away. However, basic life insurance policies may not include all the coverage you need. To increase your coverage, you may have the option to add one or more policy riders. And some riders even come standard with certain policies, but not with others.
Read on to learn more about how life insurance riders work, which ones are most common, when you might want to add one to a new policy, and which riders might already be built in.
What Is a Life Insurance Rider?
Riders, sometimes called endorsements, either increase or limit the coverage offered by the original policy. You can use riders to customize your life insurance to best meet your needs. For example, you could add:
- one or more living benefit riders to access the death benefit while you’re alive
- a children’s term rider that provides coverage for your children
- a rider that lets you increase your insurance coverage after the policy is issued
Riders are add-ons, not standalone products. While some riders may be included in your policy at no extra charge, most will increase your premiums. If you decide to add riders, you’ll usually want to do so when you buy the policy because, in many cases, you won’t be able to add a rider after your policy is in force.
Common Life Insurance Riders
Let’s take a closer look at the most common life insurance riders and when you should consider adding them.
Waiver of Premium
If you become disabled and are unable to work, a waiver of premium rider lets you skip paying premiums until you can go back to work, while still retaining coverage. Be sure to ask your insurance company what types of disability qualify you for a premium waiver, as the definition of disability can vary between insurers.
For example, some companies might consider you disabled if you can’t complete the work duties you previously performed or are trained for, while other companies might only consider you eligible if you’re unable to do any work. Typically, you’d need to satisfy a waiting period after qualifying, such as six months, before premiums will be waived (though they’ll usually be waived retroactively from the beginning of the waiting period).
Most policies won’t allow you to add or exercise a premium waiver after age 60 or 65.
If you need this waiver, it could be a lifesaver for your dependents. It ensures your family is still protected by your life insurance policy if you’re unable to work due to a qualifying disability, and unable to pay the premiums. This rider may be available for both term and permanent life policies.
Also called guaranteed purchase, this rider lets you purchase additional coverage at predetermined times in the future up to a certain age, such as 40 or 50 years old, without having to take a medical exam or go through the underwriting process. However, the cost of the additional coverage is based on your age when you add the new coverage, rather than your age when you bought the policy.
Option dates indicate when you have the option to add coverage and are specified in your policy. For example, you might be able to increase the death benefit every three years until age 46. Certain life events, such as getting married or having a baby, often trigger an option period as well, but might require you to forfeit your right to purchase additional coverage during the next option period.
Since they expire, guaranteed insurability riders are best if you’re buying life insurance in your 20s or 30s.
You might benefit from this rider if you’re unable to buy the full amount of coverage you’d like to have, but anticipate being able to afford it in the future, or if you expect to need more coverage at a later date. This rider is usually an option with permanent policies like universal and whole life insurance.
Accelerated Death Benefit
Also known as living benefits, accelerated death benefit (ADB) riders pay a portion of your death benefit (or the whole amount) to you while you’re still alive. You need to meet certain health criteria to qualify for each type of rider:
- Chronic illness: You’re diagnosed with an illness that prevents you from performing two or more activities of daily living like bathing, dressing, or feeding yourself.
- Critical illness: You experience a major health event, such as an organ transplant or serious heart attack.
- Long-term care (LTC): You can’t perform two or more activities of daily living. However, your symptoms don’t have to be chronic or terminal to qualify.
- Terminal illness: You’re diagnosed with a terminal illness with a life expectancy of typically less than a year, or up to 24 months with some insurers.
Living benefit riders are available on permanent and term life insurance policies, though permanent policies tend to have more options. One or more ADB riders may be included as standard features on new policies, but you may also have the option to purchase additional or enhanced benefits for an extra cost.
When you pass away, your beneficiaries will receive a death benefit reduced by an amount proportional to the amount that was already paid out.
Similar to a living benefit rider, a disability income rider pays out monthly if you become totally disabled. You’ll usually receive a percentage of your policy’s benefit, but this rider may require a waiting period before the benefit kicks in. It could be a good option if you don’t want to purchase a separate disability insurance policy.
Like waiver of premium riders, each disability rider has its own definition of total disability. Some companies consider you disabled if you cannot complete your usual work duties, while others require you to be unable to complete any type of work.
Benefits may be limited to a number of years, such as two, and may not be designed to completely replace your income.
Accidental Death Benefit
Accidental death benefits pay out more than your specified death benefit—two to three times—if you die in a qualifying accident. You can get this rider on both term and permanent life insurance policies.
Qualifying accidents usually exclude illegal activities and voluntary participation in dangerous activities. That means your beneficiaries probably won’t receive additional funds if you die while drinking and driving, or in a skydiving accident.
You might consider adding this rider if you have a hazardous occupation or are otherwise at risk of accidents, such as if you operate heavy machinery or drive a lot for work. An accidental death benefit rider may be added to some policies without any underwriting or a medical exam.
Convertible Term Insurance Rider
This rider is specific to term life insurance. It allows you to convert your term insurance coverage to permanent life insurance within a specified period of time without going through the underwriting process (no medical exam or questions). Depending on the policy and your age, you could have up to 10 years, until a specific age (such as 65), or until your term ends. If you don’t convert the full amount, the remaining term coverage will continue, and you may be able to convert additional amounts during the remainder of the conversion period.
Because you don’t have to reapply for coverage, a convertible term insurance rider can help you avoid problems getting insured once your term expires, such as if you were to develop health problems.
However, be prepared to pay significantly higher premiums after converting. Permanent policies are more expensive than term insurance for the same amount of coverage, and though your current health won’t impact your premium, your current age will. Premiums for life insurance policies increase exponentially with age—so if you know you’ll eventually want permanent coverage, it can make sense to convert sooner rather than later.
Paid-Up Additions Rider
Designed for use with whole life insurance policies, a paid-up additions (PUA) rider enables you to increase the death benefit and cash value on a regular basis by purchasing paid-up additions of life insurance. Think of these like tiny whole life policies, each with their own cash value and death benefit. Whole life policies that pay dividends (also known as participating whole life policies) often give you a choice as to how you’d like to receive those dividends, and one popular option is to purchase paid-up additions of life insurance with them. This increases your coverage without the need to purchase a new policy or undergo underwriting.
While dividends aren’t guaranteed, if you choose to add a PUA rider, you can purchase paid-up additions every year, for example. As a result, both the cash value and death benefit increase, and the cash value also earns dividends, which can be used to purchase more coverage.
The downside is that dividends are only paid by mutual insurance companies.
Purchasing additional life insurance with a PUA rider, could result in the policy becoming a modified endowment contract, or MEC—meaning you could lose certain tax benefits associated with the cash value in a permanent life policy.
Children’s Term Rider
On many policies, you can get life insurance for your kids without a separate policy. Children’s term riders add term life insurance for your children to your term or permanent policy. In the tragic event that your child dies, this rider will pay a death benefit. Most insurance companies cover your child until a certain age and then let them convert the rider to their own permanent policy before it expires.
The Bottom Line
Adding riders to your life insurance policy usually means your premiums will go up, so you’ll need to decide if the potential benefits are worth the additional costs.
And like any insurance product, it’s best to shop around for quotes from different life insurance providers. This lets you compare the additional cost of insurance riders between companies, and see which riders are included on some policies but not on others. Be sure to carefully review policy language so you know what’s covered.