Having the right life insurance riders in place can help protect your family as your needs evolve. Photo from Storyblocks.
Life insurance is a regular component of long-term financial planning. A lot of time is spent researching, selecting, and budgeting for the life insurance policies that will protect loved ones should a catastrophe occur. What makes that effort more daunting is that all families are vastly different. Life insurance policies aren’t always specific enough to accommodate those differences.
Enter life insurance riders! Riders are add-ons that provide extra coverage and flexibility wherever needed, allowing you to customize a life insurance plan to fit your family’s goals like a glove.
Let’s dig a little deeper into what kinds of riders are available and how they work—or, more importantly, how they can work for you.
What Are Life Insurance Riders and How Do They Work?
As previously stated, riders are optional provisions you can tack on to your foundational insurance policy. They usually either broaden or alter their terms to account for more worst-case scenarios or tailor-fit them to your situation. The idea is to patch any potentially dangerous holes–holes that expose you to financial risk–that your base life plan doesn’t specifically account for.
Basically, riders are the extra toppings on your pizza, the DLC to your favorite video game, and the seat with extra legroom on your flight. While insurance riders come with an additional cost, they are designed to enhance the experience of your family’s life insurance in meaningful ways.
Customizing Life Insurance for Your Family
While you must do your own research on what kinds of riders your life insurance carrier offers, here are a few of the most common…
- Guaranteed Insurability Rider. Guaranteed insurability riders open the door for future change should the needs of your family evolve over time. For example, say you welcome a baby into your household. With that child as your new dependent, you may decide to add coverage to your life insurance policy so that they’re included in your plan terms and goals. Without a guaranteed insurability rider in place, making changes would require you to undergo a medical exam, which—depending on your physical state and age—may make your premium payments higher. A guaranteed insurability rider makes it possible for you to skip the doctor’s visit and make changes without risking higher bills.
- Child Term Rider. While a sensitive and difficult topic, parents sometimes outlive their children. Should this tragedy befall your household, having a child term rider in place will help cover the cost of their burial, funeral, accrued debts (like student loans or medical bills if they have any), and other such costs. Riders like this are typically inexpensive, can cover multiple children or grandchildren at once, and can greatly mitigate the financial strain surrounding this uniquely unimaginable loss.
- Spousal Rider. Getting a life insurance policy for yourself and then adding a spousal rider for your partner may be a cost-effective way to cover both heads of the household without having to pay for two separate life insurance policies. With this kind of add-on, if the partner of the primary policy owner passes away, they’ll get a check in the mail to help pay for any associated costs. Spousal riders are also known in the industry as “survivorship” riders and “joint life” policies.
- Waiver of Premium Rider. As with all types of insurance, life insurance policies require that you pay monthly to keep your coverage active. However, some circumstances can make those bills disappear. What if the family’s primary breadwinner is disabled in an accident or diagnosed with cancer and unable to keep working? In that situation, if the policyholder has a waiver of premium rider on their life insurance, they will no longer have to worry about keeping up with monthly payments to retain their life insurance benefits. So long as the proper paperwork has been filed and the person meets the eligibility requirements, maintaining their coverage will cost them $0.
- Long-Term Care Rider. As you get older, you may find that you need help with daily tasks like bathing, eating, walking, etc. In that case, it may be necessary to transition to life in a nursing home or hire a qualified caregiver to assist you. What a long-term care rider does is allow you to use your life insurance money to help pay for your nursing home costs or at-home care. Long-term care is expensive in an emotional, physical, and literal sense for all parties involved. Riders like this ensure that those burdens are eased.
- Accelerated Death Benefit Rider. An accelerated death benefit rider, also known as a terminal illness rider, basically allows you to use your death benefit money before you die. So, if you’re diagnosed with a terminal illness, it allows you to use a portion of your life insurance money to cover your expenses before you pass, giving you more agency in how your financial affairs are settled. This is called a “living benefit”—a life insurance benefit that kicks in while you’re alive. Most life insurance carriers offer terminal illness riders at no additional cost. Other similar riders allow the policyholder to access funds early in the case of a chronic illness diagnosis, but it may come at a higher price.
Key Takeaways
A full understanding of life insurance riders can make all the difference in protecting a family’s future.
If you’re interested in life insurance coverage, it’s crucial to learn as much as possible. Explore all of the policy and rider options available to you so that you can build a plan that evolves with your changing needs and stands as an impact-proof financial shield when you need it most. Consider setting aside time every few months to re-evaluate you and your family’s needs, and then research life insurance options with your must-haves in mind. It’s also an excellent idea to speak with a trusted financial advisor or life insurance agent who can take your situation into account and help educate you where online resources fall short.
If you’re curious about knowing what it’s like to be a life insurance agent, check out our article here.
Life Insurance Questions?
We hope this guide on customizing your family’s life insurance with riders has been helpful.
If you’d like to learn how we can help you plan your retirement, call Empower Brokerage at (888) 539-1633 to speak to one of our Life and Annuity experts or leave a comment down below.
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