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Thursday, May 17, 2012
Life Insurance
Adding riders to your life insurance policy are helpful because they make sure your coverage fits your specific needs. Remember, not all carriers or policies offer all these riders. Some riders are also dependent on the type of life insurance you purchase. Remember to calculate how much your annual premium would rise if you added riders to your policy. For some people with smaller budgets, the cost of riders can make life insurance cost prohibitive, so choose your riders wisely. Some riders only run for a certain period, which may be shorter than the time the policy is actually valid for.
Looking for a list of riders that could make your life insurance more personal, affordable and flexible? We have a few to help you get started.
1. Level Term Rider:
A Level Term Rider provides a fixed amount of extra term insurance coverage to a permanent life policy for a stipulated period of time. A level term rider is a good way of combining permanent life with temporary life benefits on the same policy. The amount of the term life coverage offered through the rider is usually written for an amount that is up to five times the death benefit of the permanent policy to which it is attached
2. Accidental Death Benefit (ADB):
When added to a life insurance policy, this rider will pay an additional amount of money to beneficiaries listed in the policy if the insured dies in an accident. The ADB rider is also called "double indemnity," because most policies offer double the amount of the death benefit. Other policies have a cap on the amount of ADB offered.
3. Accelerated Death Benefit:
This life insurance rider allows the insured to collect on their own death benefit while they are alive if they develop a terminal illness. Diagnosis with a terminal illness can mean debilitating hospital bills, assisted living costs and long term care in a nursing home. This is a huge help for people who cannot return to work and whose loved ones have to quit their jobs to take care of them.
4. Child Rider:
Easy, convenient and affordable, a child rider is attached to a parent's policy and allows for families to pay for funeral expenses in the case of a child's untimely death. These riders can also be converted to full individual life insurance policies at the age of 18, up to a certain amount of coverage with no questions asked (varies widely). It protects your child's future insurability while still young and healthy, allowing them to have at least some type of life insurance coverage should they develop a health condition that renders them uninsurable in the future.
5. Spouse Rider:
This rider is the same as a child rider, but it is only applicable on a spouse. It is mostly sold on all types of insurance, including those offered under group plans through an employer.
6. Waiver of Premium rider:
When the person insured becomes disabled, it can be hard paying life insurance premiums, especially if the disability is long term. The inability to work and earn income can result in a lapsed life insurance policy when premiums are not paid on time. The Waiver of Premium Rider (often added to term life insurance for free) exempts a disabled policy owner from making premium payments while disabled. Most policies usually require the insured to have been disabled for at least 6 months for this rider's benefits to kick in.
7. Unemployment rider:
The unemployment rider works like the disability triggered Waiver of Premium rider. The carrier exempts premium payments for a stipulated time period if the insured loses their job. This is not usually found on term life insurance policies.
8. Guaranteed Insurability/Term Conversion rider:
This rider guarantees renewability on your term life insurancepolicy at the end of its term. This allows you to extend your coverage (both in terms of amount and time) without needing to undergo a second medical examination. This works well with term insurance because often, people are still alive at the end of the term, but aren't in the same shape as they were when they bought the policies several years ago. However, this rider is usually valid only for a certain amount of time. Always comparelife insurance rates to see what you would qualify for if you bought a second policy independent of the first one, just to make sure you're getting the best deal.
9. Family Income Payments:
This rider will hand out a continuous monthly payment to your beneficiaries in the event of your death. While withdrawing the money in one lump sum can usually save on taxes, Family Income Payments allow for a reliable steady source of income. It works well in cases where the insured does not trust the beneficiaries to use the money prudently and wisely over their lifetimes; such as in the case of a single parent leaving money to teenagers. You must choose the number of years payments are to be made.
10. Return of Premium Rider:
The Return of premium rider on term life insurance (also called ROP) allows a guaranteed refund of all life insurance premiums paid into the policy to be returned to the insured at the end of the term period if they are still living. ROP riders can hike up premiums up to 33% or more (check with your carrier), but it's a good way to ensure that thousands of dollars spent on the policy are not flushed down a drain.
11. Paid-Up Additions
This rider allows the insured to purchase additional paid-up permanent life insurance, at an affordable cost, which has cash value and loan value. It can also be eligible for dividends if the carrier is a mutual company. These cash values can be borrowed against to help fund retirement, college tuition, or other emergency expenses. The cash value in the policy can also be used to help reduce out-of-pocket premium payments because it can be reused to pay the premiums and keep the policy in force.
Always ask your agent for an in force illustration to find out how these riders can make your policy work better for you. Compare life insurance quotes and rates first; you can save hundreds of dollars in annual premium if you do.
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