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Are you ready to custom build your life insurance portfolio?

by Susan Wright | Contributor
July 23, 2020


Life insurance is purchased for any number of reasons, such as paying off debt, ensuring an ongoing income for survivors or even for supplementing future retirement income. While this type of coverage is typically geared toward the payment of a death benefit, today’s policies can be more closely fit to an insured’s actual needs. One way to do this is through the purchase of a life insurance rider. But because riders usually cost extra, it is important to determine whether or not the expense is worth the added benefit potential.

What are life insurance riders and how do they work?

A life insurance rider is an extra benefit that a policy holder may add to the coverage. Most riders will require an additional amount of premium to be paid. This cost is oftentimes low, though, because there is usually little additional underwriting required.

There are many different life insurance riders available in the marketplace today. While not all riders may be added to all policies, some of the most common life insurance riders include:

  • Waiver of premium
  • Term conversion
  • Accidental death benefit
  • Accelerated death benefit
  • Return of premium
  • Long-term care
  • Guaranteed insurability
  • Family income benefit

Waiver of premium rider – The waiver of premium rider will allow the policy holder to stop paying the premium if he or she becomes disabled, seriously injured or critically ill.

Term conversion rider – With a term conversion rider, the policy holder has the right to convert a term life insurance policy into a permanent policy, typically without having to go through the underwriting process or prove their future insurability.

Accidental death benefit rider – If a life insurance policy has an accidental death benefit rider, the beneficiary will receive an additional amount of proceeds if the insured dies as the result of a qualifying accident. Generally, death must occur within a certain window of time, such as 90 days or one year.

Accelerated death benefit rider – Although the accelerated death benefit rider and the accidental death benefit rider may sound similar, they are actually quite different. With the accelerated death benefit rider, the policy holder can receive a cash advance against the death benefit if he or she is diagnosed with a qualifying terminal illness. Upon the insured’s passing, the policy’s beneficiary will receive the remainder of the death benefit proceeds.

Return of premium rider – The return of premium rider is an optional benefit that is associated with a term life insurance policy. In this case, if the insured lives beyond the length of the policy, then some – or even all – of the premiums paid in will be refunded.

Long-term care rider – Long-term care costs can take a significant amount of your savings if you are not financially protected. So, a long-term care rider may help. With this optional benefit, the policy holder may access a portion of the life insurance policy’s death benefit on a regular basis (such as every month) to pay for his or her long-term care expenses.

Guaranteed insurability rider – With a guaranteed insurability rider, the policy holder is allowed to purchase additional insurance coverage at specific dates in the future. They can usually obtain this additional coverage without the need to go through the underwriting process. (The amount of additional insurance that is purchased is typically subject to certain minimums and maximums.)

Family income benefit rider – The family income rider provides the policy’s beneficiary with an amount of money that is equal to the insured’s income if he or she dies. This rider is actually a type of death benefit and it will usually only pay out the benefit for a certain period of time.

How much do life insurance riders cost?

Although there are some types of life insurance riders that can be added at no additional expense, there will usually be a higher amount of premium required. The cost of a life insurance rider can depend on a number of different factors, such as the:

  • Amount of additional benefit(s) that may be accessed
  • Age and health condition of the insured
  • Life insurance company

You can obtain more detailed information about the cost of various life insurance riders by talking with an insurance specialist.

Does it make sense for you to add a rider to your life insurance policy?

Although life insurance riders can provide you and/or your loved ones with an added amount of benefit, the additional coverage may not always be worth the increased premium. So, before you move forward and commit to the added benefits, it is important to weigh out the cost versus the amount of potential value that is being added.

Pros and Cons of Ading a Life Insurance Rider

Life Insurance Riders - Advantages Life Insurance Drawbacks
Life Insurance Riders - AdvantagesAdditional coverage Life Insurance DrawbacksAdded premium cost
Life Insurance Riders - AdvantagesTypically, no underwriting required Life Insurance DrawbacksMay not ever use the added benefits
Life Insurance Riders - AdvantagesCan customize policy to more closely fit specific needs

Before you commit to the purchase of a life insurance rider – as well as to a life insurance policy – it can also be beneficial to discuss your coverage objectives, as well as all of your potential options, with a life insurance specialist. That way, you will have a better understanding of how the benefits will (and won’t) work. Are you ready to “custom build” your life insurance coverage?

Because your – and your loved ones’ – needs can be unique, it is oftentimes not enough to just have death benefit coverage only on your life insurance policy. So, adding one or more life insurance riders to your plan could make sense – provided that the added value exceeds the additional premium cost.

Alliance America can help

Alliance America is an insurance and financial services company. Our financial professionals can assist you in maximizing your retirement resources and achieving your future goals. We have access to an array of products and services, all focused on helping you enjoy the retirement lifestyle you want and deserve. You can request a no-cost, no-obligation consultation by calling (833) 219-6884 today.

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