Understanding Life Insurance Riders

As you may know, a rider is an optional coverage that brings about increased protection or additional features. With life insurance, you can choose to slightly increase your life premiums to add on a rider – something that would cover life events your original policy may not, offer additional benefits for your dependents upon your premature death, or even offer benefits for events that happen during your lifetime. Simply put, life insurance riders are enhanced coverage for those who are looking for that slight “oomph” in their existing plan.

You can choose which riders you want to add and, in some cases, the level of coverage that you desire from those riders. Of course, choosing a life insurance rider isn’t exactly black-or-white. It takes a decent level of understanding to know what you want out of your life insurance rider, which one to choose, and what your insurance provider actually offers.

In this article, we’ll go over various life insurance riders, why you may want one, and how to choose.

How do life insurance riders “work?”

Once a life insurance rider has been purchased an added to your policy, it acts as an extension of your existing policy and would “kick in” according to the terminology of your existing policy, or under new terminology – i.e., your life insurance benefits may only payout to your dependents upon your death, but with a new rider, your loved ones could receive a partial benefit if you are diagnosed with a critical illness during your lifetime.

It is added in contract form and essentially rides along, becoming part of your new policy contract. It’s an additional means to customize your insurance beyond how you may already have customized your insurance, helping to keep your coverage current and aligning with your needs.

What kind of life insurance riders are there?

While your options for life insurance riders may be different depending on your insurer, we’ve included a list here of the various types of riders that you may be able to purchase, depending on your eligibility, current health status, and more.

Critical Illness

Critical illness insurance allows you to claim a portion of your death benefit while you are still alive if you become critically ill, such as if you are diagnosed with cancer, suffer from a heart attack or stroke, etc. You receive your benefit in cash and can use it however you’d like.

Chronic Illness

It sounds similar to critical illness, but it’s slightly different. This life insurance rider permits you to claim a portion of your death benefit while you are still living, so long as you have been diagnosed with a qualifying long-term disability/illness.

Accidental Death

If the cause of your death was accidental, i.e., such as due to a car accident, your death benefit payout will increase. This is a good option for those who might have time to prepare additional savings for their family during the time where you are sick but still able to work, but would be unable to if the cause of your death was unexpected and untimely.

Terminal Illness

Allows you to claim a portion of your death benefit while you are still alive if you are diagnosed with a qualifying terminal illness.

Return of Premium

With this rider, you would pay a marginal premium, and, upon the end of your term, premiums are returned to you in full. If you should die before your term is up, your premiums would also receive the paid premium amount.

Children’s Term Insurance

Albeit morbid, this form of insurance is essentially a type of life insurance coverage for a child, that covers them until they receive adulthood.

Note that this is a very surface level view of the various life insurance riders that do exist, and the list that you may be able to choose from may be very different than the one that we described above. An Excalibur Defender can run you through the options that your current provider offers. We take the time to put your needs ahead of our own and give you the best advice, based on our expertise, on which rider option may work the best for your needs.

How much do life insurance riders cost?

Life insurance riders do come at a cost, unfortunately, but thankfully they rarely increase our premiums by that much. Life insurance in and of itself happens to be one of the cheapest insurance policies that exist. Generally, rider costs will correspond with how much coverage is being added or the kinds of benefits the coverage provides. There is minimal underwriting be used to gauge the costs of these added riders, and the odds of them being used by the insured is very low.

But of course, the added cost is just the very reason why some people might not want riders on their life insurance policy. They don’t expect or need to use certain benefits or certain features that are offered by a rider, and therefore the added costs could just be an unnecessary expense, which ultimately increases your insurance premium(s).

So, why would I need a life insurance rider?

Well, it’s really up to the individual. Whether or not Person A needs a life insurance rider is irrelevant to whether or not you need a life insurance rider. The greatest thing about having a broker in your corner is that they can advise you based on your personal circumstances, whether it makes sense to have purchased an insurance rider.

That being said, many insurers won’t allow you to modify your insurance policy beyond a certain point, so having a rider is a great way to tailor-make your plan. Be sure to go over all the fine print of your rider before adding it to your life insurance policy, or sit down with your broker to discuss the benefits of your plan and if it really makes sense for you and your family.