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Life Insurance: Additional Coverage with Riders

(5/21/2012) Obtaining a life insurance policy should be the beginning of the story, not the end. While term, whole, variable and other main types of policies are great investments, they may be insufficient to cover all the expenses and possibilities for you and your family. That’s where “riders” come in.

Riders are amendments or special additions to your life insurance policy that provide a specific type of coverage. Policyholders often add riders to add additional security and funds for loved ones. Each rider comes at additional cost depending on age, health, and type of policy, and available riders will vary by company and policy.

The most common, and most recommended, riders include:

ACCIDENTAL DEATH
In the case of an accident, this rider provides an additional amount of money for beneficiaries. In many cases, this rider actually doubles the amount of the death benefit provided in the main policy.

ACCELERATED DEATH
This rider provides for funds to be paid while the policyholder is still alive. When the insured is diagnosed with a terminal illness, or requires long-term care or admission to a nursing home, his or her ability to continue earning an income is in question. This rider allows all or some of the policy to be paid out to help cover the medical costs and financial needs, but typically must stay under a cap of $250,000 to $500,000. More often than not, this policy is automatically included for free in regular life insurance policies, but the company may charge a fee if it is used.

DISABILITY INCOME
In the case you become totally disabled and unable to work, this rider provides for regular income paid from the policy. The amount of the income is specified in the rider, as well as the time over which it’s paid. Depending on the rider, this disability income may only be provided in case of disability from an accident instead of sickness. A similar rider, called the “Waiver of Premium” rider, helps the insured keep financially solvent by waiving premiums. This rider expires when the policyholder reaches age 60 or 65.

GUARANTEED INSURABILITY
With this rider, you can ensure coverage now and in the future. This is a boon for people who develop medical conditions that might otherwise be considered uninsurable. This rider can sometimes come with conditions and time limits, so be sure to check with your agent or read the rider very carefully.

FAMILY INCOME BENEFIT
Rather than receiving a lump sum payment after the policyholder’s death, this rider allows beneficiaries to receive a continuous monthly payment for a specified time period. This can provide a reliable source of income in the deceased’s absence.

CHILD PROTECTION
In the difficult case of losing a child, there would not be loss of income. But there are financial consequences. This rider provides coverage for these final expenses.