In insurance a rider is a supplemental agreement attached to and made part of a policy, usually to expand the coverage of the policy. Typically these riders require additional premium to be paid
These are the most common riders that can be attached to a life insurance policy:
Accelerated Death Benefit Rider
This rider allows the insured person to use (a percentage of) the death benefit if he or she is diagnosed with a terminal illness that carries a prognosis of death within a year. If benefits are paid in this manner, the death benefit will be reduced by the amount of accelerated death benefit paid. Some insurance companies charge no extra premium for this rider.
Please note that receipt of benefits received in this manner can have a negative impact on any potential Medicaid or Social Security benefits.
Accidental Death Rider
This rider pays out an additional amount of death benefit due to an accident which was the direct cause of death. Normally, the additional benefit paid out upon death due to an accident is equivalent to the face amount of the original policy, which doubles the benefit. This is often called double indemnity when the additional benefit equals the face of the policy.
This rider provides a death benefit for children up to a specified age. Coverage can include multiple children with a maximum benefit for each (up to $20,000). Once the child attains the maximum age of the rider, the term plan can typically be converted to a permanent policy (usually up to five times the original face amount).
Waiver of Premium Rider
With this rider, the future premiums are waived if the insured becomes permanently disabled for a specified period of time (typically six months). While disabled, the insured is exempt from making premium payments. The definition of “totally disabled” can vary from one insurance company to another.
Riders allow you to modify your life insurance policy according to your needs. When purchasing a new policy, discuss these options with your advisor to see if they fit your needs. Adding riders can significantly add to the cost of your policy, so it becomes an economic choice as well.