Some Insurance Riders

Riders are special insurance policy provisions that provide additional benefits not found in the original contract, or that make adjustments to it. The name “rider” is taken from the concept that they have no independent existence; they have force and effect only when they’re attached to a policy, or “riding” it. A rider can also be a term policy that’s attached to, or rides, a permanent policy in order to provide additional or specialized coverage. Riders can be used to add benefits or take benefits away from a policy; those that enhance benefits normally come at the cost of an additional premium amount. A waiver is a type of rider that’s usually used to exclude benefits and for which no premium is charged. For example, a waiver may be attached to a policy which excludes the payment of benefits for death by a specified cause such as a particularly hazardous occupation or hobby. Listed below are a number of typical life insurance riders:

An accidental death benefit (ADB) rider, also known as double indemnity, may be added to an insurance policy to provide for an additional amount to be paid to the beneficiary should the insured person die as the result of an accident. This additional amount, usually referred to as the “principal sum”, is generally an amount equal to the face value of the policy (thus the term double indemnity). It could, however, be three or more times the policy’s face value.

The waiver of premium rider exempts a disabled policyholder from the payment of premiums during the period of disability, while keeping the policy in force. For the waiver of premium to apply, the insured’s disability must be permanent and total. A waiting period of from three- to six months normally applies before the benefits of the waiver of premium go into effect.

The disability income rider guarantees that an insured policyholder will receive a monthly income from the insurance company should he or she become totally and permanently disabled, for as long as the disability lasts. This rider usually includes the waiver of premium rider. As in the case of the waiver of premium, the disability income rider also requires a waiting period of generally three- to six months before taking effect.

Usually attached to juvenile insurance policies, the payor rider ensures that if the person who’s paying the premium (typically a parent) dies or becomes disabled before the child has reached a specified age, the insurance company will waive all further premiums until the child reaches that age. Simply put, the child will not be without an insurance policy if something happens to the parent or guardian.

The guaranteed insurability rider, or GIR, guarantees that the insured will be able to purchase more permanent (whole life) insurance at specified ages, without proof of insurability; in other words, without needing to take a physical examination.

Developed primarily as a sales tool, the return of premium rider is merely an increasing amount of term life insurance which always equals the total of the premiums paid at any point during the effective years of the rider. It doesn’t actually return paid-in premiums, but adds an additional amount to the death benefit that equals the premiums paid at that time -- as long as the death falls within the time period specified in the rider.

With the cost of living rider, the insured has the option to increase his or her policy’s death benefit (with a corresponding increase in premium) to match any increase in the cost-of-living index. This is usually accomplished by either changing the face amount of an adjustable life policy or by attaching an increasing term rider to the policy.

Additional insureds riders are commonly attached to life insurance policies to provide coverage for one or more additional people. These are usually term insurance riders covering a spouse, one or more children, or all family members in addition to the insured policyholder.

Accelerated benefits riders, also known as living benefits riders, allow policyowners who are terminally ill, or who require long-term care or the permanent services of a nursing home, to collect all or part of their death benefit while still alive. This can help to relieve some of the financial burden caused by the ever-rising costs of health care.