Life insurance is a tool to protect you and the important people in your life from financial hardship. A great feature of life insurance is the ability to customize it for your particular situation and lifestyle. While you have various types of term and permanent insurance to choose from, you also have policy add-ons to supplement a life insurance policy with more coverage.
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These policy add-ons are referred to as riders. Riders vary by insurance company and by policy, as do their workings and costs. Adding riders may increase your premiums so be sure to determine if the extra coverage is worth the cost. There are many riders available across the industry, but we will focus on the most common.
A great feature of life insurance is the ability to customize it for your particular situation and lifestyle. While you have various types of term and permanent insurance to choose from, you also have policy add-ons to supplement a life insurance policy with more coverage. These policy add-ons are referred to as riders.
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Term Conversion Rider
A term conversion rider allows you to convert your term life insurance policy to a permanent policy without having to go through underwriting or take a medical exam. A term policy may have been perfect for you when you were younger, but as you age a permanent policy may fit your situation better.
This rider is built into most life insurance policies and is extremely beneficial if you happen to run into health issues as you age. Having the ability of converting your term policy to a permanent policy could mean the difference between having a term policy that runs out or one that could be converted with a claim being paid.
Disability Income Rider
The disability income rider provides a waiver of premium and a supplementary income if you were to become disabled. Typically, the supplementary income is based on the face amount of your policy. Most insurance companies will place a limit on how much will be paid per month and on the length of time you will receive the benefit. This rider is very similar to a long-term disability insurance policy, but it can be conveniently added on to your policy rather than purchasing separately.
Long-Term Care Rider
A long-term care rider is similar to a long-term care insurance policy. Money is taken from your death benefit to pay for your care if you become chronically ill and unable to take care of yourself. You can use this benefit if you have to stay at a nursing home or receive home care.
With this rider, it’s important to keep in mind that maximum benefit is typically only a percentage of the life insurance policy’s face amount and it is taken from your death benefit.
Critical Illness Rider
A critical illness rider will provide a lump-sum benefit to help cover medical expenses and other costs if you were to be diagnosed with a critical health condition. This benefit is taken out of your death benefit and covers illnesses such as cancer, stroke, heart attack, coma and others.
Medical expenses can add up quickly with a critical illness and many people don’t have an emergency fund large enough to cover these expenses. This is why you may opt to add critical illness coverage.
Accelerated Death Benefit Rider
The accelerated death benefit rider pays a portion of the death benefit to you (the insured) if you become terminally ill with a short life expectancy. This rider has become a standard in the industry and is usually included automatically for free or offered at a nominal cost. The policy states how much of the death benefit would be available before death and it’s usually capped at $250,000 to $500,000.
A child rider provides coverage should the death of a child occur. While this tragedy would not result in loss of income, it could still bear financial hardship for a grieving family in regards to taking off work and funeral expenses. The rider would provide financial assistance. Once the child reaches the age of 25, the rider can typically be converted to an individual policy without an exam.
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