What is a Life Insurance Rider?

Summary: A life insurance rider is an optional feature you can add to a standard life insurance plan. With the right one, you can tailor your policy to meet your needs. Most come at an additional cost, although many people find the added amount worthwhile.

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Purchasing life insurance is not a one-size-fits-all approach. While some people may be satisfied with the features of a standard insurance policy, 42% of Americans feel they require additional protection.¹ That is where insurance riders can come in.

So, what is a rider in insurance? An insurance rider is an add-on cover to a basic policy, which can offer some protection to the precise needs of the insured, often at a small cost. Adding a rider may allow you to customize your insurance policy to suit your current and future needs and enjoy additional benefits without purchasing a new insurance plan.

Why would you buy an insurance rider?

For an extra cost to your total premium, riders can offer more coverage for a policy you already have or one you plan to buy. This can give you some flexibility in the amount of protection you receive, since you can add or remove coverage options as needed.

How life insurance riders work

Think of your policy like a car. The basic model gets you to different places reliably and conveniently. Riders are like the features you add to your vehicle to make it safer, more comfortable and better suited for your needs. Each additional feature, or rider in our case, adds more protection by allowing you to buy additional coverage.

Life insurance riders and add-ons may also let you cover other people or for a specific period of time. A Child Term Rider, for instance, allows you to help protect your kids if something were to happen to you. A term life rider offers the insured tailored temporary coverage for specific needs. You can add a term life rider to help cover the mortgage for a specified period, so that you have a larger benefit for that specified period.

The cost of adding a rider is usually lower than buying a new standalone policy. And while riders aren’t right for everyone, they can be beneficial under the right circumstances. You can call a licensed agent or producer to know more.

Common types of life insurance riders explained

There are several types of life insurance riders, and the ones you might choose depend on your individual situation. Here are a few of the common types you may encounter.

Accelerated death benefit rider

Accelerated Death Benefit Rider is a type of Living Benefit Rider that lets you access part of the funds from your life insurance policy early if you become terminally ill and need palliative care. ² You can use these funds to help cover your medical expenses or to help set your family up with some financial peace of mind. Although this is commonly offered, make sure to ask your individual insurance provider for details before purchasing a policy.

You may wonder how this differs from withdrawing the cash value of a whole life or other permanent life insurance policy. While you may be able to access your cash value early, having an accelerated death benefit rider guarantees that you can gain access to the policy’s funds to help with bills, regardless of the cash value accrued. The amount you use is ultimately deducted from the death benefit amount of your policy’s coverage.

Child life insurance rider

A child life insurance rider refers to an add-on to life cover that pays out a death benefit in the event the policyholder loses their child. Insurance companies may offer a child life insurance rider as an add-on to the parents’ life insurance policy.

The cost of the rider is added to the parent’s premium, and coverage is generally provided to all dependent children in your household. Ages covered range from 6 months to 21 years, but make sure to double-check the ages covered by your carrier if you’re considering this type of insurance rider.

Living benefit rider

A living benefit rider is a broader category that includes an accelerated death benefit and may cover critical illnesses and disability, depending on the rider. In most cases, it doesn't cost extra to activate this feature. And you can use it if you become critically ill, disabled or experience a serious condition that your rider covers.

Costs of an insurance rider

In general, the cost of an insurance rider depends on the type of rider you want and the type of insurance policy it’s being added to. Typically, the cost of adding an insurance rider to a policy depends on a few factors:

Choosing the right insurance riders for your needs

Insurance riders offer several benefits, and deciding on the right one will depend on your needs. Here are just two examples to consider when determining the right insurance riders for you.

1If you have a history of critical illnesses, you may consider adding a critical illness rider to help cover the costs of ongoing medical treatment.

2If you're the family breadwinner, an accidental death rider may be a good option in the event you die from an accident. Note that some insurance companies may offer double indemnity if the cause of death is a covered accident. That means your family may receive double life insurance compensation per this policy since the extra death benefit paid is equal to the initial policy's face amount. It can also pay some amount for treatment if you survive the accident and have a qualifying injury as a result.

Regardless of the riders you choose, it's always wise to review the terms of the rider before purchasing, as they can vary from one insurer to another.

Life insurance can offer some peace of mind as it may help protect your loved ones should anything happen to you. Adding riders may provide more coverage to you and to them. And since insurance riders are flexible, you can choose what you need based on your needs and circumstances.

Frequently asked questions (FAQs)

What is the difference between a rider and a standalone policy?

A rider is an addition to an existing insurance policy. The feature offers more coverage or amends the current terms of your insurance plan. A standalone policy is a separate, independent life insurance coverage. It typically costs more than purchasing a rider but may offer more comprehensive coverage.

Are life Insurance riders worth it?

Whether a life insurance rider is worth it depends on your needs and the type of rider. For instance, if you may need extra financial support for your medical treatment later in life, it may be wise to buy a health-related rider that allows you to access a portion of your death benefit.

But please note that adding a rider increases your premium, and sometimes it may be by a significant percentage. Compare your policy with and without the rider, and compare the price changes before deciding.

Can I add a rider to my life insurance after purchase?

Yes, you can. Although insurance riders are often added when purchasing a new policy, most insurance companies allow the insured to add riders to their existing policy. However, you’ll have to wait until the policy’s anniversary, that is, when it completes one full year.

Sources

1. LIMRA, 2024 Insurance Barometer Study, July 2024

2. Mayo Clinic, Palliative Care, October 2024