Life Insurance Riders: What They Are and When You Need Them

It’s tricky enough to understand how life insurance works. Debating the merit of term versus whole life coverage, trying to calculate how much insurance you need, and determining when you should buy coverage — it’s enough to make your head spin.

When shopping for a new life insurance policy, you will likely be offered a number of add-ons, called riders, that can be included in your policy. Many of these riders are optional, though they usually provide added peace of mind that can easily warrant the extra expense. But just how can they help protect you and your loved ones? And which ones should you add?

Let’s answer some of your life insurance questions by looking at the most common life insurance riders you may encounter, what they typically offer in terms of coverage, and whether you should consider adding them to your next policy.

What is a life insurance rider?

Life insurance riders are supplemental benefits that can be added to a number of different policy types. These optional features can provide you and/or your life insurance beneficiaries with extended or more flexible coverage, often for a very reasonable cost.

Riders will typically need to be added to your life insurance policy at the time it is purchased. However, there are a few exceptions to this rule: depending on your policy and certain life events, there are a handful of riders that can be added to your coverage down the line.

Common types of life insurance riders

Here’s a look at the most common types of life insurance riders, and why they may be beneficial to you and your loved ones.

Waiver of premium rider

In order to maintain your life insurance coverage and carry continuous protection for your loved ones, you are required to pay premiums on your policy according to a set schedule. If you miss those payments, your coverage could lapse and you may forfeit your policy benefits. What if you were to become seriously ill, get injured, or even be disabled, though, and were suddenly unable to pay those premiums each month?

With a waiver of premium rider — sometimes called a waiver of cost of insurance — you can rest easy. When added to a life insurance policy at the date of issue, this rider offers protection against qualifying illnesses, injuries, and/or total disabilities that may make it difficult for you to pay your premiums each month.

If your situation qualifies for coverage, this rider will step in and pay the premiums on your insurance coverage while you’re unable to work. If you have a permanent disability, it may even cover your premiums until you reach a certain age (65-plus, in some cases). Most insurance companies have a waiting period before the waiver of premium rider can be utilized. For many, this waiting period is six months to a year.

The waiver of premium rider is typically available for purchase only when the insurance policy is first issued. So if you’re interested in this added protection, you’ll need to buy it from day one. Some preexisting conditions can preclude you from buying this rider, as well.

Accelerated death benefit rider

Most of us purchase life insurance as a way of protecting those we leave behind after our death. In some cases, though, life insurance coverage can be used to provide for the policy owner, especially in the case of the accelerated death benefit.

If you are diagnosed with a terminal illness, an accelerated death benefit rider allows you to access a portion of your policy’s death benefit. You can then use those funds while you’re still alive to pay for medical bills, cover household expenses, or even just enjoy the last few months of your life with your family.

The fine print for this rider will vary from one insurer to another. Some insurance companies, such as John Hancock, automatically include this coverage with every policy. Others will make you add it on as a paid rider. You’ll find that the requirements to use these benefits will also vary, with some insurance companies requiring a terminal diagnosis of one year or less; others may allow for two years.

It’s important to be aware of the implications involved with using the accelerated death benefit, however. Although it offers a financial resource for the insured, any funds utilized (and in some cases, interest) will be deducted from the policy’s death benefit. This means if you have a $200,000 life insurance policy and pull $100,000 as an accelerated benefit, your beneficiaries would only receive the difference of $100,000 — or sometimes even less — upon your death.

Term life rider on a whole life insurance policy

Certain seasons of life may warrant more life insurance coverage than others. For instance, you may want a larger policy while your children are young and/or while there is still a mortgage on the family home. When the house is paid off and your children are grown, though, you may not need nearly as much coverage.

For some, this situation may warrant buying laddered term coverage through a company like Ladder. If you prefer a whole life policy, though, you may consider adding a term life rider instead. This rider allows you to increase your benefit amount through temporary term coverage, which supplements your existing (permanent) coverage.

The term life rider is good for a specific period of time; if you were to die while it was active, your beneficiaries would receive the death benefit from both your whole life policy and the term rider policy. However, if you were to die after the term rider period had expired, your loved ones would receive the benefit of only your whole life coverage.

Term conversion rider

There are many reasons why you may want to purchase term life insurance policy versus a permanent life insurance policy, the biggest of which is probably price. What if you change your mind later on, though? Is there any way to do so, and can you get credit for those premium payments you’ve been paying every single month? With a term conversion rider, the answer can be yes. And luckily, this rider is often included in term policies at no additional premium cost.

As the name implies, policies with a term conversion option or rider — which may also be referred to as convertible term insurance — allow you to switch your policy from term coverage to a more permanent option down the line. In most cases, this can be done without the need for any additional medical underwriting, and your paid premiums may even count as a credit toward your new policy.

There is usually a specified window during which you are allowed to convert your coverage from term life to a cash value life insurance policy. Be sure to read the fine print of your policy to ensure you know when this window ends.

Guaranteed-purchase-option

Life insurance with a guaranteed purchase option — also called a guaranteed insurability rider — allows the insured to add extra coverage to their insurance policy at certain points in their life. This includes boosting coverage when you get married, have children, or even buy a home.

Why is this important? Well, it’s hard to tell what life will throw at you. The cash value insurance policy you purchased at age 30 may not provide enough coverage when you reach age 45, especially if you have a different career or a larger family.

A guaranteed insurability rider is also a great supplement to a policy purchased for a child by their parents or grandparents. This allows for the child to grow up with a cash-accumulating safety net, but also gives them the flexibility to personalize that same lifelong policy once they become an adult.

Accidental death rider

Unfortunately, there are many ways to die. You could get ill, you could die of natural causes, or you could be involved in an accident of some kind. Although most term and whole life policies already cover each of these causes of death, an accidental death rider can provide an additional benefit to your loved ones if your cause of death is accidental in nature. This means your beneficiaries receive your policy’s usual death benefit plus the benefit provided by the accidental rider.

The accidental death benefit rider essentially offers a bonus payout to your beneficiaries for an accidental death, which could help your family manage the added difficulties and trauma of a sudden death. This benefit might include deaths caused by car accidents, falls, drownings, or even homicide in some cases. It’s important to know exactly what sort of accidents your specific policy will cover, however, as they all vary.

Family income benefit rider

When calculating how much life insurance to purchase, you will likely factor in things such as debt, future expenses for your children, and the replacement of your income for a certain number of years. In some cases, though, you might worry about your loved ones managing a large lump sum and making it last for the intended number of years. In this case, a family income benefit rider might be the right option.

This rider allows for your beneficiaries to receive a lump sum death benefit from your policy, as well as a monthly installment intended to replace your income to some degree. This rider is set to protect your loved ones for a specific number of years, and often coincides with milestones such as the insured’s planned retirement date.

After the rider’s coverage date ends, the added monthly benefit will fall off. Also, in many cases, your beneficiaries will receive the lump sum death benefit at this time, rather than having received this immediately after your death.

Child term rider

Let’s face it, no one wants to consider the possibility of something happening to their child. In a worst-case scenario, however, the last thing a grieving parent wants to worry about is any financial implications.

A child protection rider allows a policyholder to create an affordable coverage for their children by adding it to their own existing life insurance coverage. This term rider typically protects your children until they — or the insured — reach a specific age.

Long-term care rider

Whether death comes by old age, injury, or even an illness, you may require long-term care in those final months, or even years, of your life. That care can get incredibly expensive, easily costing upward of $7,600 a month, and health insurance often doesn’t cover much, if any, of it.

Rather than burden your loved ones with that expense, a long-term care rider on your life insurance policy can step in. This rider can help cover the costs involved with in-home or nursing home care, up to the coverage limits included. You may also be able (or choose) to utilize accelerated death benefits to pay for your long-term care expenses, if long-term care insurance is not available.

Return of premium rider

No matter how young you are, it can make sense to buy life insurance to protect those you love, especially if they would be financially impacted by your death. But what if you purchase, and then outlive, a term policy? What happens to all the money you spent on premiums over those years?

By adding a return of premium rider, you can actually get a portion of those payments back if you outlive your coverage. The terms of this rider will vary by insurer and policy type, but can offer as much as 100% of your premiums back as long as you meet certain requirements.

How to know if a life insurance rider is right for you

For many of us, there’s no question of, “Is life insurance worth it?” We already recognize the value and security that a solid policy can provide to those we would leave behind. However, what we may not know is whether the many life insurance policy riders available to us are worth the added expense.

Deciding whether a life insurance rider — or two, or three — makes sense for you and your family depends on your own unique situation. Just as everyone’s ideal policy value is different, so are the supplemental benefits and protections we may choose to add.

Take a look at your biggest concerns surrounding your loved ones and what worries you the most about your death. Is it the expense your family would incur should you need round-the-clock care or is it the idea of your spouse and children navigating a sudden, accidental death?

Do you want the flexibility to add more coverage later on or even convert a term policy into cash-value coverage? And what about the 30 years’ worth of premiums you might pay for term life coverage just to outlive your policy?

Some life insurance riders will provide additional coverage that makes more sense than others. Take a look at your family’s financial needs and get your spouse’s opinion before you buy.

Bottom line

It doesn’t matter how much life insurance coverage you need or what sort of policy you have in mind: be sure to shop around and compare life insurance quotes before you sign on any dotted lines.

If simplicity is most important, look at life insurers such as Bestow that offer easy, affordable coverage without a medical exam. If you’re looking to create a truly personalized product with the riders that suit your family best, check out our list of the best life insurance companies, some of which will help you compare options from multiple insurers.

At the end of the day, though, the perfect life insurance policy is the one that protects those you care about most while also offering you peace of mind for years to come.