Life Insurance Riders (Terms Explained)

What are riders in insurance? Typically offered for life, home, car, and rental insurance policies, riders are add-on benefit options or restrictions to a basic insurance policy. 

Customers can add a range of life insurance riders to different types of term life insurance or permanent policies, from riders that protect estates to spouse insurance riders. You will have to pay additional fees to add a rider to your insurance policy. Still, rider life insurance stipulations allow you to tailor your policy to meet your individual needs. 

Continue reading to learn more about riders for life insurance. We provide a complete list of riders so you can see which ones might be beneficial for your policy and discuss the most important takeaways about life insurance with riders.

Life Insurance Riders Explained 

What are riders for life insurance? Riders offer extra coverage options to customers at an additional cost, which is usually low. 

Essentially, riders amend the original policy’s terms so that the policy becomes personalized to your unique needs. It will add coverage that isn’t offered on the main policy or supplement the policy’s existing limits. Some insurance companies may call their riders insurance endorsements or amendments on insurance policies. 

You should know a few important things about insurance riders before we dive more in-depth into what insurance riders do:

• Riders cost extra on top of the insurance rates you are already paying for your policy. 
• There are multiple types of riders, such as waiver of premiums, long-term care riders, and more. 
• Depending upon the insurance company, you may not be able to add riders after you buy the policy.

Read on to learn more about riders and some examples of life insurance riders. 

Understanding Riders 

Basic life insurance policies give you standard coverage and death benefit payouts. Riders allow you to tweak these insurance policies to your needs and, in some cases, help you avoid purchasing a separate policy to get the complete coverage you want. 

Riders like these are useful for people with specific needs that might not be met with a standard life insurance policy. For example, you may want to get an accelerated death benefit if you have a serious and terminal illness. With an accelerated death benefit, policyholders can get some cash benefits before they pass away. 

However, it is important to understand that you will have to pay extra for a rider. Be aware that sometimes riders simply add more coverage to existing coverage in the standard policy, so make sure to consider if you really need a rider before purchasing one.

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Complete List and Examples of Different Types of Life Insurance Riders 

There are over a dozen types of insurance riders for life insurance. However, bear in mind that riders won’t be offered on all types of life insurance policies and aren’t available with all insurance companies. 

If one of the riders on the list is important to you, shop at insurance companies that offer that rider. 

Accelerated Death Benefit Riders 

An accelerated death benefit rider is part of living benefits life insurance. It allows policyholders to use some of their death benefit payouts prematurely if they are diagnosed with a terminal or chronic illness. Critical would be illnesses that would result in death if not treated, and chronic illnesses are those that impede daily life.

In some cases, your insurance company will already include this rider in your basic insurance policy, eliminating the need to pay more to add it. 

The way an accelerated death benefit rider works is that the policyholder can take out some or all of the death benefit payout. The amount allowed will depend upon the insurance company. 

The policyholder can then use this money however they see fit, such as paying off expensive medical bills or hospice care. However, the downside is that the beneficiaries will receive only the amount left after the policyholder withdraws money. 

In addition, if the policyholder withdrew the benefit due to a terminal illness, they don’t have to pay taxes. In this case, a terminal illness is when a person is estimated to have less than 24 months to live. 

Child Life Insurance Riders

Child life insurance riders are typically added to a parent’s life insurance policy. If the child passes away, the company will pay the policyholder a death benefit. These death benefits are usually low, around $10,000, and are meant to cover the funeral costs of the child.  

Children can be added with a child life insurance rider at a few days old. Coverage expires once the child turns 18, although some insurance companies may allow children to stay on until they are 25. Some insurance companies may also allow the child rider policy to be turned into a regular life insurance policy when a child ages out. 

Disability Life Insurance Riders

A disability life insurance rider will pay the policyholder a monthly benefit if the policyholder becomes disabled.

The money is usually pulled from the death benefit payout, which means the beneficiaries will also receive less money. The amount will vary depending on the insurance company.

Early/Enhanced Cash Value Riders

Early or enhanced cash value riders offer a policyholder higher refunds if they have to relinquish their life insurance policy within the first few years of purchasing it. Learn more about cash value in life insurance to determine if you need this rider.

Generally, there are cancellation fees for ending a life insurance policy and higher insurance rates in the first few years to discourage surrendering a policy. Early or enhanced cash value riders reduce financial risk. 

Estate Protection Riders

What is a rider in insurance for estates? If policyholders want part or all of their death benefit to go to their estate, then an estate protection rider can help pay for any estate taxes. 

Exclusionary Riders

An exclusionary rider is a stipulation on a policy that denies insurance coverage for certain conditions, such as pre-existing medical conditions. Exclusionary riders may not be applied to children. 

Guaranteed Insurability Riders

A guaranteed insurability rider is offered for permanent life insurance policies. With this rider, policyholders can raise their death benefit without having to fill out another full application or go through another medical exam.

Lapse Protection Riders

A lapse protection rider is intended to prevent a policy from being terminated. For example, if the cash values in your permanent life insurance policy become too low, the company cannot terminate your policy when you have this rider.  

Long-Term Care Riders 

A long-term care rider is meant for any cash-value life insurance policy. If the policyholder needs long-term care for which they need to withdraw funds, the long-term care rider helps with this. 

The overall death benefit will be reduced for the beneficiaries depending upon how much the policyholder withdrew for long-term care. 

Overloan Protection Riders

An overloan protection rider will prevent policies from lapsing if the policyholder’s loans are more than the cash value of the policy. 

Return of Premium Riders

A return of premium rider is intended to reimburse policyholders at term life insurance end of term. So if you outlive your policy, you will get a refund of some or all of the premiums you paid for coverage, making buying term life insurance more economical. 

Spouse Life Insurance Riders

What is a rider in life insurance for spouses? Spouse life insurance riders allow policyholders to provide a small amount of life insurance coverage for a spouse. Bear in mind that the coverage provided won’t be as much coverage as with a full life insurance policy. 

Term Conversion Riders

A term conversion rider allows a term life insurance policy to be converted into a permanent policy once the term ends. Policyholders will not have to take another medical exam with a conversion rider. 

Waiver of Premium Riders

A waiver of premium rider comes into play if the policyholder becomes disabled, seriously injured, or seriously ill. The waiver of premium riders will allow policyholders to stop making life insurance payments as long as they are disabled. 

Once they no longer qualify as disabled, the policyholder must resume making payments.  

How to Find Affordable Life Insurance Riders

How much is life insurance? Because life insurance riders are intended to add bonus coverages to your main policy, they generally do not cost much. The exact cost of an insurance rider will depend upon the insurance company. 

However, you can expect life insurance riders that offer more protection, such as the return of premium riders, to cost more than life insurance riders with fewer financial benefits. 

Ultimately, the best way to find out how much life insurance riders cost is to get quotes for the policy type and riders you want. This will allow you to compare companies’ costs for different riders based on your coverage needs.

Case Studies: Exploring the Benefits of Life Insurance Riders

Case Study 1: Accelerated Death Benefit Riders

Sarah is a policyholder diagnosed with a terminal illness. Sarah had an accelerated death benefit rider added to her life insurance policy, which allowed her to access a portion of the death benefit while she was still alive. With the funds, Sarah was able to cover her medical expenses and ensure financial stability during her remaining time.

Case Study 2: Child Life Insurance Riders

John and Emily, a married couple, added a child life insurance rider to their life insurance policy when their daughter Lily was born. Unfortunately, Lily passed away at a young age. The child life insurance rider provided a death benefit to John and Emily, helping them cover the funeral costs and providing some financial support during a difficult time.

Case Study 3: Waiver of Premium Riders

Mark, who suffered a severe injury that left him unable to work. Mark had a waiver of premium rider attached to his life insurance policy, which allowed him to stop making premium payments while he was disabled. This rider provided Mark with some financial relief during his recovery period.

Case Study 4: Long-Term Care Riders

Mary, an elderly policyholder, required long-term care due to a chronic illness. With a long-term care rider added to her life insurance policy, Mary was able to access funds from the policy to cover her care expenses. Although the death benefit for her beneficiaries would be reduced, the long-term care rider provided Mary with the necessary financial support.

Case Study 5: Return of Premium Riders

Robert, who purchased a term life insurance policy with a return of premium rider. After the term of his policy ended, Robert outlived the coverage period and received a return of all the premiums he had paid. The return of premium rider allowed Robert to recover the money he had invested in the policy, making it a cost-effective option for him.

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The Final Word on Life Insurance Riders 

While you do have to pay extra for life insurance riders, they allow you to customize coverage to your and your family’s needs. Some riders will add new benefits to an insurance policy, whereas others will simply enhance the standard coverages that are already in the main policy. 

If you want to see how much a life insurance policy costs and compare prices, use a life insurance planning tool or our free quote comparison below to find the best life insurance company for your needs.

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