Insurance riders are add-ons to your life insurance policy. A standard life insurance policy will simply pay out a death benefit when you die, but riders allow you to use your policy for financial support in other ways. To use a rider, you must experience a qualifying event, like being diagnosed with a terminal illness or becoming disabled.
Some life insurance riders are common enough that they’ll be included in your policy automatically without increasing your premiums. Other riders come with an added cost. When you’re purchasing your life insurance policy, your agent or broker can help you determine what life insurance riders you need.
What are the different types of life insurance riders?
Most riders fall into one of five categories:
Some riders may be worth an additional cost, depending on your needs, while for others, you may want to consider getting another standalone policy.
Accelerated death benefit insurance riders
Accelerated death benefit insurance riders (ADB) allow you to take money from the death benefit while you’re alive if you’re diagnosed with a terminal illness. You’ll need a doctor to confirm that you’re terminally ill and have six to 12 months to live in order to be eligible for a payout.
ADB riders are often used to help with end-of-life care such as hospice care, living in a nursing home, or hiring a private caretaker. But the funds don’t have to be used for care. Some insurers even suggest that you use the living benefit to pay for a vacation or anything that can make your final days as easy and enjoyable as possible.
These benefits are paid out as described in your policy documents. The amount you receive will vary, but can be as high as 80% of the death benefit.
Critical illness insurance riders
Critical illness insurance riders pay out if you’re diagnosed with an illness specified in your policy. This could include a heart attack, cancer, stroke, kidney failure, ALS, and other critical conditions. Most people use this money for medical bills, but you technically may use the funds at your discretion.
The money for the payout is taken out of the death benefit and is disbursed as a lump sum. If you die, your beneficiaries will receive whatever is left of the death benefit when they file a claim on your policy.
There are a few types of critical illness riders.
1. Chronic illness insurance rider
Chronic illness riders pay out accelerated benefits while you’re still alive if you’re no longer able to perform at least two of the six activities of daily living (ADLs) — eating, bathing, getting dressed, toileting, transferring, and continence.
2. Long-term care (LTC) insurance rider
A traditional life insurance policy with a long-term care rider (LTC) will pay out your death benefit for long-term care while you're alive if you can no longer perform two of the six activities of daily living.
Adding LTC coverage often comes at a high additional cost and is priced based on your health at the time of purchase, not a flat fee like some other riders.
3. Waiver of premium for disability insurance rider
A waiver of premium insurance rider waives your life insurance policy’s premium payments if you become disabled and can no longer work. This rider can add $10 to $50 per month to your premiums.
Family insurance riders
Family insurance riders offer additional coverage for members of your family, like your children or your spouse. There are two types of family riders: spousal insurance rider and child insurance rider.
1. Spousal insurance rider
If you don’t have a separate insurance policy for your spouse, a spousal income rider ensures that if your spouse dies you’ll receive a death benefit. Spousal coverage, either through a rider or a separate policy, is important even if your spouse doesn’t earn an income or isn’t the primary breadwinner – you’ll still have to cover the costs of household labor they do, like childcare.
While a spouse rider may cost less than a separate policy, it may also provide less coverage.
2. Child insurance rider
A child insurance rider provides a death benefit if your child passes away. While most children don’t need life insurance, a child insurance rider can cover funeral costs for grieving parents or secure coverage for children with medical conditions that might make getting a policy more difficult when they’re older.
Most child insurance riders can be converted into permanent insurance policies once the child enters adulthood. On average, child insurance riders cost an additional $5 per month.
Accidental death & dismemberment insurance riders
Accidental death and dismemberment insurance riders are designed for people who have riskier lifestyles, such as a dangerous job or hobby that will increase your premium. The AD&D rider pays you money from the death benefit if you lose a limb or digit in an accident.
If you die in an accident, the rider pays out to your beneficiaries in addition to your regular death benefit. Because of the strict parameters under which the death or injury must occur to get a payout, an accidental death and dismemberment insurance rider usually isn’t worth the cost.
Benefit structure insurance riders
While long-term care riders pay out money early to help you manage unexpected illness or disability, benefit structure insurance riders trigger adjustments to the policy itself.
Benefit structure insurance riders include return-of-premium, term conversion, and family income.
1. Return-of-premium insurance rider
The return-of-premium insurance rider ensures that if you outlive your life insurance policy, you’ll be refunded any premiums you paid toward the policy. The refund is tax-free and some people use it as a forced savings vehicle.
These riders are expensive and might not be a worthwhile add-on because they’ll increase your premiums significantly and you’ll forfeit any growth you’d have through interest or investment.
2. Term conversion insurance rider
Term conversion riders are included in most term life insurance policies. These riders allow you to convert your term policy into whole life insurance at the end of the term.
This option can be useful for older adults who want to maintain some life insurance coverage when their policy’s term ends, but don’t want to go through underwriting again to get a brand new policy.
3. Family income rider
A family income rider adjusts how the death benefit will be paid out to your family if you die while the policy is active.
With this rider, instead of one lump sum, the policy pays out part of the death benefit in monthly installments, like an income. Some insurers also sell standalone family income policies if you want your entire death benefit handled this way.
The pricing varies based on the amount of additional coverage you buy. If you think your beneficiary would be better off receiving some of the death benefit in smaller, predictable chunks rather than one large lump sum, this rider creates that payout structure for them.
4. Guaranteed insurability rider
The guaranteed insurability rider allows you to increase the size of your death benefit at specific life milestones. The option dates when you can buy more coverage vary, but usually occur every three or five years from the day your policy went into effect and within 30 to 90 days of a major life event, such as getting married or having a baby.
You’ll have to pay more for the increase in coverage, but you won’t have to go through underwriting or take a new medical exam before your policy’s cutoff age, which is usually between age 40 and 50. After that, you can still add coverage, but you’ll have to take a medical exam.
Guaranteed insurability riders are not offered for every life insurance policy, and are most commonly added on to whole life insurance policies. Guaranteed insurability riders can be as low as an additional $3 to $5 per month.
Most people don’t need a guaranteed insurability rider because they need less life insurance as they get older and their health won’t worsen significantly before age 40 to 50.
The rider is best used by people who have a chronic illness or other condition that may worsen, a family history of serious illness that could affect them before age 45, or want a permanent policy and plan to increase their coverage in the future.
Are life insurance riders worth it?
Whether a life insurance rider is worth it depends on your specific needs and largely on your specific financial and personal situation.
Some riders are included at no cost, so adding them is a no-brainer. Others cost a significant amount of money and you should thoughtfully consider your risk before adding them.
If you’re considering adding a rider to your insurance policy, connect with a licensed agent. They can help you talk through your risk factors, evaluate potential costs, and consider if you’d be better off getting a separate policy instead.
At Policygenius, our experts are licensed in all 50 states and can walk you through the entire life insurance buying process while offering transparent, unbiased advice.
