What You Need to Know About Riders in Insurance

Lynda Taylor is an assistant director of Risk Product Development at Northwestern Mutual.

If you’re thinking about getting life insurance, you might already know that term life, whole life and permanent life are among the most common policies. But there are even more options. You can also customize your policy by adding riders.

Below, we define what a rider is in life insurance and take a closer look at the most common riders.

What are riders in insurance?

A rider is an optional add-on to your insurance policy that can either add benefits or adjust your coverage. To add a rider to your policy, you’ll need to pay an additional premium, but it’s typically a small addition to the overall policy cost. Many people find the valuable protection to be well worth the additional cost.

Another way of looking at it is to think of your policy as a hamburger, with different riders as different kinds of toppings. If you want cheese or bacon, or both, you’ll pay extra. On the other hand, if you’re happy with just a plain hamburger, that’s fine, too.

What types of riders in insurance are available?

Which, if any, riders are available to you will depend on things like:

• The insurance company you choose: Some companies may offer many optional riders, while others will offer few or none at all.
   
• The type of policy you select: Some riders are available only for certain types of insurance policies, such as whole vs. term life.
   
• Your eligibility: To add certain riders, you may need to meet certain eligibility requirements, like being a certain age.

Common types of life insurance riders

Some riders are more readily available than others. These include:

1. Waiver of Premium Benefit: The Waiver of Premium Benefit is a rider designed to waive the insured individual’s premium in the event that they become totally disabled due to illness or injury. If you have term life insurance, some companies will allow you to convert to permanent life insurance and will continue to waive the premiums while you are disabled. By adding this rider, you ensure that you will be able to maintain life insurance coverage even in the event that you are unable to work.

2. Additional Purchase Benefit: The Additional Purchase Benefit (APB) is a rider that allows the insured individual to purchase additional life insurance (during specific time frames or when they experience certain life events) without needing to prove their insurability. These dates typically coincide with the individual reaching a certain age. For example, an APB rider might allow you to purchase additional insurance when you reach very specific ages, like 22, 25, 28, 31, 34, 37 and 40.

This rider is popular among individuals expecting major life changes, such as getting married or having a child, which would, in theory, justify higher levels of coverage. It allows the individual to purchase only the level of coverage that they need at the moment while providing the opportunity to increase their coverage when needed without having to worry about changes to their health.

This type of rider is also commonly known as a guaranteed insurability rider because the insured individual can add coverage even if their health declines in the future.

Some less common riders

While the riders discussed above are the most common, you may hear about other types of riders. Possibilities include:

 3. Accidental Death Benefit: Provides an additional death benefit in the event the insured individual dies from an accident. While the amount of additional coverage varies, it can often be up to double the face value of the policy. (This is why the rider is also sometimes known as a “double indemnity” rider.)

4. Family Income Benefit: Converts the death benefit into a steady income stream for the policyholder’s family. But it’s worth noting that even without this rider, there are often options for a death benefit payout beyond the lump sum.

5. Accelerated Death Benefit or Accelerated Care Benefit: Allows the insured individual to access all or a portion of their death benefit while they are alive in case they are diagnosed with certain conditions that require long-term care.

6. Return of Premium: This is specific to term life policies. If you do not die during your term, your premiums will be refunded. While this may sound like a good idea, there may be better options.

7. Child Rider or Spouse Rider: Pays a death benefit if your child/spouse dies while your policy is active. The amounts are smaller than a policy insuring the child or spouse. Coverage for all ends when the policy terminates, which could leave the family member unprotected—so it shouldn’t be counted on as a replacement for a standalone policy.

8. Cost of Living Rider: Also known as an “inflation protection rider,” this rider increases the premium and death benefit to keep up with increases to the cost of living.

9. Term Conversion Rider: Gives the policyowner the right to convert from term to permanent without the extra steps of underwriting. This is included with some term products without an additional fee.

10. Term Life Insurance Rider: Provides a smaller term policy alongside the larger permanent policy.

Are life insurance riders worth it?  

When evaluating different riders and considering whether to add them to your policy, it’s important to consider your overall financial picture and how life insurance fits into that plan. If you are unsure whether or not a rider makes sense for your specific situation, a financial advisor who is familiar with life insurance can help you evaluate your options.