What is a rider on a life insurance policy?

A life insurance rider is an addition to a life insurance policy that adds extra coverage or an additional feature. Generally, riders are added when you purchase life insurance, but there are some riders that can be added after the policy has been issued. It's best to ask your agent what riders are available and make a decision before you submit a life insurance application.

Here are seven life insurance riders to consider.

Common life insurance riders

Accelerated death benefit rider (also called living benefits rider)

An accelerated death benefit rider allows you to use a portion of your own death benefit money while you're still living. Typically, you must be chronically or terminally ill to use the rider. Many companies include an accelerated death benefit automatically as part of the policy, at no extra cost.

Whatever is left of the death benefit will go to your beneficiary when you die.

Why you might want this rider:

You can access some or all of the death benefit while you're still alive to pay medical bills and other expenses.

Keep in mind:

The use of this rider is typically limited to those with a terminal or severe illness. The rider is meant to help with end-of-life financial hardships. It is not meant to replace health insurance or long-term care coverage.

Accidental death benefit rider

This rider pays your beneficiaries an additional amount if you die as a result of an accident, such as a car crash.

Why you might want this rider:

It can provide you and your family with extra financial assistance after an unexpected accident. Accidents are the third leading cause of death each year in the United States, according to the Centers for Disease Control and Prevention.

Keep in mind:

This rider covers only accidental death. It doesn't pay out for death caused by disease or illness, and exclusions could include suicide, being under the influence of drugs or alcohol, piloting an aircraft or dying during an act of war.

Also, this rider might pay out only if you die within a certain time after an accident. Check the policy for rules. For example, the rider might pay out only if death occurs within 90 days of an accident.

Critical illness rider

This rider pays a portion of the death benefit in a lump sum to you if you are diagnosed with a critical illness.

Why you might want this rider:

You can use the money to pay for medical bills and other expenses while you are being treated for the illness.

Critical illness rider

Keep in mind:

There is usually a waiting period for payment, typically after 90 days of the diagnosis.

There is also generally a "survival period" prior to payment. Typically, no payment from the rider will be made if you do not survive 30 days after the diagnosis. However, the base policy will still pay the death benefit.

There may be an expiration age for the rider, typically at age 65.

Disability income rider

If you become disabled due to illness or injury and cannot work for an extended period, this rider supplies a percentage of your monthly income.

Why you might want this rider:

It can help pay the mortgage or rent, a car payment and daily expenses. It can help cover bonuses and commissions that you're unable to earn while disabled.

You may be able to customize your policy to increase the coverage amount as your salary grows. Some companies also waive the life insurance premiums while you're disabled.

Keep in mind:

If you buy this rider, you'll want an amount of disability income to cover your basic living expenses.

There is typically a waiting period before payment, anywhere from 30 to 180 days, depending on the insurance company.

The length of time you can collect from this benefit is capped, though some companies pay for up to two years. Also, the total amount may be capped.

Guaranteed insurability rider

This rider guarantees that you can add more life insurance coverage at certain times, regardless of your health.

Why you might want this rider:

If you develop an illness or medical condition, this rider allows you to increase the amount of life insurance coverage regardless of your health.

Or, If your income and expenses increase, you can purchase additional coverage.

Keep in mind:

The option to add coverage typically happens at predetermined ages, up to a certain age. For example, you may be able to buy extra coverage between the ages of 25 and 40 at three-year intervals (ages 25, 28, 31 and so on.) The ages and intervals will vary by policy.

Certain life events may trigger an option for you to buy additional coverage, such as marriage and birth or adoption of a child.

There may be a cap to how much total coverage can be purchased.

Long-term care rider

A long-term care (LTC) rider allows you to access a portion of your death benefit while you're alive to pay for a nursing home, assisted living, home health care or other expenses that qualify.

Why you might want this rider:

Life insurance with an LTC rider can help protect your retirement savings and lessen your reliance on Medicaid.

With life insurance with a long-term care rider, you may be able to avoid the "use it or lose it" problem of a standalone long-term care insurance policy. For example, if you don't need long-term care and never use the rider, the entire death benefit will be paid to your beneficiaries.

Keep in mind:

To qualify, you typically must be unable to perform two or more “activities of daily living.” These are often defined as:

  1. Bathing.
  2. Continence.
  3. Dressing.
  4. Eating.
  5. Getting into and out of a bed, chair or wheelchair.
  6. Using the toilet.

Make sure to note any exclusions listed for the rider, which could include alcoholism or drug addiction, attempted suicide and other issues.

There is usually a waiting period for payment after you become critically ill or disabled. You may be able to purchase a shorter waiting period for extra cost. A typical waiting period is around 90 days.

If you have a pre-existing condition and don't list it on the application, you could be denied coverage if the critical illness or disability happens within the first six months of the policy.

Waiver of premium rider

This rider waives your life insurance premium payments if you become totally disabled.

Why you might want this rider:

This rider provides helpful financial assistance: You won't have to worry about paying your life insurance bill to keep your policy in-force when you're not working due to disability.

Some companies allow you to add this rider after the policy has been issued.

Keep in mind:

You'll need a doctor to provide documentation for proof of disability.

You must be under a certain age to use this rider, typically between ages 60 and 65, depending on the company.

There may be a waiting period before you can use the rider. Some riders require the disability to last for at least six months before you qualify.

FAQ

Do riders affect life insurance?

Riders generally affect life insurance in two ways:

  • They can increase the cost of the policy
  • They can help close coverage gaps or provide extra coverage that’s appealing. For some, the tradeoff for paying higher rates is worth it to customize a policy that’s a better fit than a standard policy.

Can I increase my life insurance coverage?

With certain types of life insurance, you can increase your life insurance coverage after the purchase, depending on the policy and life insurance company. For example, with term life insurance, you may be able to increase the benefit amount or the term length.

If a life event like marriage, buying a house or having a special needs child affects your life insurance needs, it’s a good idea to speak to your life insurance agent about options. Other possibilities, such as buying life insurance riders or converting term life insurance to permanent life insurance may be a cheaper alternative, depending on your goals.