It is certainly no secret that term life insurance is the most affordable solution for replacing one’s income in the event of one’s death. It’s also no secret that younger and healthier adults can purchase a lot of coverage for about the price of a large pizza. Term life insurance is cheap, but it doesn’t have to be just a death benefit.
There are several life insurance riders that can be added to a term life insurance policy that will broaden the coverage and provide other benefits. And the good news is, these valuable riders don’t cost as much as you might think. There are one or two you may not want to purchase, but in most cases, the insurance applicant should give serious consideration to all of the valuable riders that are available for just a little extra money. Here, we’ll discuss the most popular life insurance riders and how they will enhance your insurance coverage to more than just a death benefit.
The riders listed below are in no particular order because we have no way of deciding what would be most important for your circumstances and budget.
Accelerated Death Benefit Rider
The accelerated death benefit rider is one of the most popular riders available and in fact, most insurers have begun to include it with all their life insurance products. This is a living benefit rider because you don’t have to die to benefit from it. Here’s how it works.
If an insured is diagnosed with a terminal or chronic illness (depending on the company), the insurance company will advance a portion of the death benefit to the named insured so they can deal with the cost of treatment. Medical care is expensive, especially for terminal or chronic illnesses, so having this rider will provide a living benefit to the policyholder. Many insurance companies offer this rider free of charge.
Disability Waiver of Premium Rider
Knowing how important your life insurance can be for you and your family members, it makes sense that you can protect the policy from cancellation if you’re unable to make the premium payments because of a disability that prevents you from working and earning money.
This important rider provides for the life insurance company to waive your periodic premiums when you are totally disabled and unable to work. The terms of the rider vary from company to company but most insurance contracts will have specific language regarding the length of time that the disability waiver will remain in effect and they will typically have an age limit for which the rider is applicable.
We do recommend, however, that you consider a stand-alone disability policy if the risk of becoming disabled is very important to you.
Guaranteed Insurability Rider
This may be the most important rider that every applicant should consider, and here’s why. A lot of people need more life insurance than they can afford at the time they are applying and typically believe they can buy more in the future. The problem with this is simple; what if you become ill and cannot afford additional coverage or even qualify for it?
With the Guaranteed Insurability Rider on your policy, you can add additional coverage to your policy without having to worry about medical underwriting. Like other riders, the terms of the rider will vary by company so it’s important to find out what the rules are with a company you are considering.
For young adults who are starting a family on a shoestring, this rider will be critical as your family grows and your debt grows with it. The more you owe, the more life insurance you need. Don’t take the chance that you will be limited on your life insurance coverage when you need more down the road.
Accidental Death Benefit
Commonly referred to as ADB, the accidental death benefit is a very popular rider because the additional premium is typically very low. This rider provides for your insurer to pay a higher death benefit (usually 2 times your normal benefit) if you were to die as the result of an accident.
It’s also a handy rider to add to your policy when you cannot afford to purchase the full death benefit that you need to replace your income. It’s important to note that even though most financial gurus consider accidental death coverage a waste of money; deaths caused by accidents in the U.S. continue to go up, not down. In fact, in 2017 there were 64,795 deaths that were caused by accidental poisoning and exposure to noxious substances.
It’s important to always read the terms and conditions for the accidental death benefit to make sure you understand them before you purchase this rider. As we’ve mentioned previously, insurance companies vary on the terms and conditions of the riders they offer.
Child Term Rider
If you are starting a family or already have children, they should be insured as well. Nobody likes to consider the death of a child, but unfortunately, it happens and the last thing you want to worry about is paying for his or her funeral while you’re grieving your loss.
Most companies will offer a maximum death benefit like $15,000 or $20,000 to cover all dependent children in the household and additional childbirths or adoptions will automatically be added to the policy.
Return of Premium Rider
The return of premium rider, although the most expensive rider available, is a great choice for young adults. This rider provides for the life insurance company to return all premiums you’ve paid into your policy in a tax-free lump sum if you outlive the term of your insurance policy. The additional premium is typically anywhere between 40% and 60% of the base premium but can be well worth it.
For example, let’s say, John Collins, a 25-year-old married male plans to purchase a $500,000 20-year term life insurance policy his premium would be about $19.00 per month. If he added the return of premium rider, his premium would go up about 50% to about $28.50 per month. In 20 years, when the policy is ready to expire, if John is still living, he would receive a check from the insurer for about $10,260 tax-free. He could then use this money for anything he wants to.
The Bottom Line
Although term life insurance is the most affordable life insurance available, it doesn’t have to be just a death benefit. There are numerous life insurance riders available that can enhance your coverage by offering living benefits. These additional living benefits empower you to put together needed insurance coverage that will take care of you and your family when the worst thing happens.
To learn more about the life insurance riders that are available to you, contact your insurance professionals to determine your individual needs and how these life insurance riders can enhance your coverage.