Many life insurance policyholders want to take care of their beneficiaries with the best coverage options available and consider adding an additional policy, or rider, to their current coverage. These special features can add an extra layer of security and add more flexibility to a life insurance policy, but are they worth it?
According to some experts in the life insurance market, not all riders have the same level of benefit, and some are not worth the money spent. Educating oneself about what types of riders are available is the first step in determining the best additions to add to your policy. Read on to learn about the more popular options available and if they are worth the extra cost for their benefit.
An accelerated death rider's primary benefit is to provide the policyholder the option to receive a portion of the death benefit if s/he becomes terminally ill. This amount varies from policy to policy, as does the definition of what qualifies as a terminal illness. Often, insureds who purchase this rider will cash in on this benefit when they have a year or less left of life.
This policy is sometimes already part of a life insurance policy at no cost. Still, one should read all coverage documentation and find out about adding on this rider when purchasing new life insurance.
When purchasing whole life insurance, some will opt for coverage that lasts their lifetime. While this option may be more costly than a standard life insurance policy, there are significant savings when adding a term life rider to a whole coverage policy. The reason for purchasing an additional term policy is to increase the death benefit amount without increasing the whole life insurance premium in a proportionate amount. Instead, the insured can easily double or triple their coverage at a lower cost compared to increasing the cost and amount of whole policy coverage.
Easily one of the more popular life insurance riders on the market, this additional coverage ensures life insurance policy premiums are paid if the insured becomes disabled and unable to do so. This rider lasts for the duration of the customer’s life insurance policy. There are a few conditions regarding certain types of coverages that one should keep in mind when determining if this type of rider will work for them.
Universal Whole Policies
Also called a "waiver of cost of insurance," this rider covers the universal whole life policy's costs but not the premium percentage that handles the investment side of the coverage.
Term Life Policies
This rider will cover the entire premium for the life of the policy. This means someone with a 30-year policy but becomes disabled at year five would have the remaining 25 years taken care of by this additional insurance.
Group Long-Term Disability Properties
While also having a similar premium payment guarantee in the case of disability, this option is also much more expensive. Costs can be 10 percent of a term life insurance premium or more.
At the end of the day, waiver of premium riders is a great investment, especially if one doesn't have any form of disability coverage. While it is better to have a policy covering instances of disability because of wage loss, having this rider added onto a life insurance policy will at least guarantee your loved ones will have a financial safety net in case of your passing.
Guaranteed Insurability Rider
This rider is straightforward in how it supplements an insured’s life insurance policy. A medical exam is a common requirement when taking out new life insurance coverage or increasing it. Guaranteed insurability riders enable a policyholder to purchase additional coverage and not be required to undergo another health exam.
As mentioned before, there are many life insurance riders in the market, and while the initial benefit may sound like a great addition to your current coverage, these may not make much fiscal sense in the long run.
An example of this problem is the long-term care rider. Policyholders typically purchase this extra coverage for their life insurance policy to help pay for healthcare costs that Medicare may not cover, like home health care services or assistive medical devices like a walker.
The issue is that while the premise of the rider seems relatively straightforward in what it will cover, it can be complex in what it takes to qualify and in understanding the many different options available of this life insurance add-on.
Another rider that gets frequently offered in employer-based group life insurance benefits is accidental death and dismemberment. This policy typically pays out an amount that is equivalent to the face value of the insured's life insurance policy if they suffer a serious injury or death due to an accident. But, the very circumstances it covers makes it possibly not worth the cost.
Because this rider only pays a death benefit if the insured dies in an accident or suffers a severe injury resulting in loss of a limb, the odds of needing this type of coverage are extremely small.e Statistics demonstrate that the majority of deaths in this world do not fall under accidental circumstances, so the chances of ever receiving a benefit from this type of plan may not justify the cost.
When trying to determine the best life insurance coverage and possible riders to create a secure financial future for your loved ones or business, speaking with an experienced life insurance attorney is a smart decision. Our firm can discuss what goals you have, the type of provisions you foresee for your beneficiaries, and help you determine the appropriate life insurance products to purchase. Contact us today to learn more and set up a consultation to discuss your future planning needs.