A Guide to Life Insurance Riders (2024)

Life insurance policy riders vary by insurer, but many are considered standard offerings among most companies. When shopping for a policy, one of the questions you may want to ask is which policies carry various riders and provide extra coverage and extra benefits, and then use this information to design a policy that best suits your unique circumstances.

Common types of life insurance riders include:

Accelerated Terminal Illness. This rider is also called an Accelerated Death Benefit rider (ADB) and is often included at no charge with many life insurance policies. This rider allows those diagnosed with a terminal illness to collect a portion of the death benefit while they are still alive. Specifics vary by company, but often a terminal illness is one in which the policyholder has less than 12 months to live and allows them to access up to 50% of the benefit.

Critical Illness. This rider is similar to a terminal illness rider, except the policyholder does not need to be diagnosed as terminal to collect a portion of their death benefit. A living benefit rider may include chronic illnesses and diseases such as cancers, severe diabetes or debilitating diseases as diagnosed by a qualified medical professional. You can use this to pay for nursing home expenses or create added disability income.

Accidental Death. Beneficiaries can be awarded an additional policy death benefit if the policyholder dies due to an accident, such as a car crash. Terms vary for an accidental death benefit but may include an additional 25% payout in many cases. Some riders also provide an additional benefit coverage amount for dismemberment, such as the loss of a limb, with a specified cash benefit paid depending on the nature of the injury.

Term Conversion. A policyholder can convert a term life insurance policy to a whole life policy without undergoing a medical exam during a specified period. That adds flexibility by letting you choose permanent coverage later on without having to get an exam, which can be a valuable benefit if your health takes a turn for the worse. Conversion riders may be included in the monthly premium, allowing policyholders to convert for as much as 30 years or more into the future.

Waiver of Premium. If a policyholder becomes disabled and can’t work, this rider pays premiums so that a policy can remain in force. Be sure to ask about waiting periods and how long the waiver remains in effect when shopping for a policy.

Child Term. This rider allows you to add coverage for all children, generally in small amounts, for an additional premium cost. Term coverage is often convertible to a permanent life insurance policy when the child reaches a certain age.

Guaranteed Renewability. Most term life insurance coverage will guarantee that you can renew a policy on a year-to-year basis after your term expires. The catch is that you’ll pay much higher premiums. Usually, it is cheaper to buy a new policy when a term policy expires, but this rider makes sense for people diagnosed with a serious or terminal disease near the end of their term and have no other coverage options.

Charitable Benefit. This is a less common rider, but some providers will add an extra 1% to your standard death benefit (up to a maximum designated maximum) to be paid to the charity of your choice, over and above the amount paid to your designated beneficiaries, for no additional cost.

Paid-Up Additions. This can help increase the accumulation of tax-deferred cash values and death benefits by purchasing paid-up additional insurance to supplement non-guaranteed cash value and death benefits.

Renewable Term. You may need added coverage at specific times, such as when your children are young or you have a large mortgage. People sometimes use a renewable term rider to buy shorter-term coverage to guard against these added layers of need.

Spousal/Two-Party. These pay out if a policyholder’s spouse dies, but typically don’t offer as much protection as if the spouse had a separate policy.

Cost of Living. This rider gradually increases the policyholder’s coverage to align with inflation and the Consumer Price Index. However, as coverage increases, so do premium costs.

Riders are designed for maximum protection based on individual policyholders’ unique life challenges or concerns, perhaps decades in the future. There are several advantages to consider with riders.

• Allow for maximum customization of base policies
• Provide important added financial protection for added peace of mind
• Can be added for free in some cases
• Can be added for small incremental premium costs
• Address specific concerns related to health, a growing family or additional protection when it’s needed the most
• Wide range of options that vary by provider

Some riders are automatically added to policies at no cost for enhanced coverage. Others may be added for a small additional premium payment, while others may cost more but provide the exact type of coverage a policyholder wants.

It’s important to discuss rider options with an insurer or an independent broker or agent when you shop for a policy. Be sure you fully understand the costs, limitations and exclusions so there are no surprises later if you need to use the added coverage.

Some riders are included in life insurance policies at no additional cost, but others will have additional premium costs that will add to your bottom line outlay. Each policyholder must evaluate their unique circumstances and decide if riders bring added value to ensure peace of mind for the policyholder and their loved ones.

You can purchase as many riders as you want. Consulting with an industry professional will help guide you to find the best affordable life insurance coverage based on what you need.

Although exact costs will vary by insurer, the type of riders you want and your unique risk profile, here are some examples of what you might expect for some types:

• Child Protection. Adding a $10,000 death benefit for the death of a child will likely cost around $5 per month per child.
• Accidental Death and Dismemberment. A benefit that pays up to $50,000 may also cost around $5 a month. However, this may be adjusted upwards if you engage in a risky lifestyle or you have a dangerous job, such as a firefighter or police officer.
• Return of Premium. This rider is only added to term life insurance policies, but it can be very expensive, possibly adding as much as 30% to your base premium cost.
• Waiver of Premium. It can cost as little as $5 to $10 a month if you add this rider to a $100,000 whole life policy.
• Critical Illness. This rider is usually very affordable. It is often added without any extra cost with the best whole life insurance policies.

It depends on your circumstances and what you can afford. Some riders may be added to your policy at no additional cost, but you will have to discuss your needs versus costs with your loved ones and get input from an insurer or an agent as well.

Consider these factors as a starting point:

• How much you can afford
• Other life insurance policies already in force
• Potential availability through your employer
• Your long-term health prognosis
• Other assets you have in place to protect your family (such as savings, stocks, real estate, etc.)

Riders are an important part of the life insurance policy process. Your needs may be simple or you may be approaching an important part of your life when your family needs your income the most to protect against losing a home or paying college expenses or other major financial impacts.

The types of riders that work best for you may come at an added cost, but if you can afford them, most present an excellent added-value opportunity. When you’re getting life insurance quotes, consider what riders are available as well. You can work with a financial professional to help determine which ones would work best for you.