Common term life insurance riders
If you have someone in your life who depends on your income--your spouse, your child or an elderly parent--then you should consider some form of life insurance. A term life policy guarantees a payout to your beneficiary if you die during the "term" of the policy, hence the name.
Although an important financial tool, a term life policy does not have to be "one size fits all." Purchasing an insurance policy has something in common with buying a car: you can choose to buy the base model, or you can add options. In insurance terms, these options are called riders. A rider allows you, the policy holder, to customize your term life insurance policy to suit your particular needs.
Ask about riders up front
If you have homeowners or renters insurance, you can often add a rider to cover an inherited jewelry collection or a new surround-sound system after the policy is in effect. With term life insurance, however, certain riders may only be available to you at the time the policy is purchased, so it's important to ask questions up front.
With term life insurance, riders often can be attached at no additional cost. Just as it's important to consider how much coverage you need and for how long, you also should consider what riders are appropriate for you and your beneficiary, and ask about any additional premiums you'll pay.
Common term life riders
If you're in the market for a new policy or you want to add coverage to an existing policy, here are some of the most commonly offered riders:
- Waiver of premium: This popular rider serves as a type of disability insurance for those under age 60 or 65 (depends on the policy). If you become disabled during the term of the policy and cannot pay your premiums, a waiver-of-premium rider ensures that your policy will be maintained by the insurer through the initial policy duration. The provision continues as long as you remain disabled or until the policy term expires.
- Guaranteed insurability: Ideally, you're in good health when you start a new term life policy. If you want to be able to renew it when you're older (when you may be experiencing health setbacks or a little midlife weight gain) a guaranteed-insurability rider allows you to add coverage or extend your term without providing medical proof of insurability, such as a medical exam.
- Accidental death benefit: If your policy includes an accidental death benefit provision, your beneficiaries receive additional payments (in some cases up to two or three times the policy face value) if you should suffer an accidental death before a specified age while the policy is in force.
- Accelerated death benefit: The accelerated death benefit rider is designed to anticipate cases such as terminal illness involving high medical costs, whether in a hospital stay or in hospice care. This rider allows you to collect some or all of the payout while you're still alive, without draining your family's savings.
- Return of premium: This may be as close as you get to a money-back guarantee. Some or all of your premiums will be returned if you survive the policy's term. The catch is that you pay significantly higher premiums up front for the right to have those premiums returned to you before the policy expires.
- Child rider: A child rider allows you to add coverage for your children. An advantage of this coverage is that it often allows the insured child to take out his or her own coverage in the future without evidence of insurability when the policy term ends or when the main policy holder dies.
Knowing all your options can help you tailor your term life insurance policy to meet the anticipated needs of you and your family far into the future.
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