Thursday, September 22, 2016

7 Most Common Types of Life Insurance Riders

When you buy life insurance, depending on the type of policy you buy, you usually have the option to add additional features and options to the policy. These additional options are called riders. I've listed 7 of the most common life insurance riders below and what each one of them does.

While I've tried to list the most common life insurance riders, each insurance company you might work with has developed their own riders with rules that are unique to them. Most, but not all, optional riders have an additional premium cost to add them. Be sure and check with your insurance agent to see what is available.

Here's the list I put together for you.

  • Accidental Death Benefit Rider (ADB) Accidental death benefit provides an additional death benefit in the event the insured dies in an accident. The most common amount is double the face amount of the base policy. Sometimes accidental death benefits include dismemberment benefits. In that case it would be abbreviated as AD&D.
  • Waiver of Premium Rider Waiver of premium pays the premium in the event that the insured (or sometimes the payor) becomes totally disabled and can't make the premiums. After an elimination period like six months, the insurance company would then begin to pay the premium.
  • Child Term Rider A child term rider covers any dependent children for a certain amount of term life insurance up to a certain age. The child rider is usually priced as a flat amount no matter how many children you have. It can also include an option to convert the rider into a permanent policy later.
  • Level Term Rider A level term rider adds a flat amount of term life insurance that last for a certain period of time to a whole life policy.
  • Guaranteed Insurability Rider A guaranteed insurability rider provides an insured with options to purchase additional life insurance at later points in life without the need to satisfy any medical requirements.
  • Terminal Illness Rider A terminal illness rider will pay you part of your life insurance while you are alive should be diagnosed with a terminal illness.
  • Chronic Illness Rider Similar to the terminal illness rider, the chronic illness rider will pay you an amount of money in certain situations if you are diagnosed with a certain chronic illnesses or lose the ability to do a certain number of activities of daily living. Activities of daily living, or ADL's as they are called, are things we take for granted every day like eating, going to the bathroom and getting around for example.

Each of these riders have certain unique characteristics that you might find important and want to add to your policy.

The most common riders I see people add are accidental death benefit, wavier of premium and the child term rider.

What kind of life insurance riders have you added to your policy? Let me know in the comments below.

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Michael is a champion of guaranteed issue for employees in the workplace. He's been an insurance agent since 1992 and has worked with thousands of employees.