25 March 2014 0 Comments

Riders

Screen Shot 2014-03-26 at 2.54.51 PMA rider is a benefit added to a basic life insurance policy.  Most riders require an additional premium, but some may not.  Here’s a synopsis of some of the types of riders that may be available and my comments:

Accelerated Death Benefit

This rider states that if the insured is terminally ill a portion of the life insurance will be paid prior to death.  Any amount pre paid will be deducted from the ultimate death benefit.  The definition of “terminally ill” will vary somewhat from company to company, but usually states that the insured is not expected to live for more than 3 to 6 months.  The amount paid will be a percentage of the policy’s stated death benefit with a maximum.  Typically there is no added charge to include this rider, but it usually must be requested when the policy is applied for.

Waiver of Premium

If the insured becomes totally disabled while the policy and this rider are in force, premiums will be waived.  Disability must have lasted for 6 month and is defined differently from company to company from total and permanent to inability to perform duties of current occupation..  This rider will terminate at a stated age, usually age 60 or 65.  There is a charge for this rider.  It is seldom purchased, most likely due to the stringent definition of “disability” and its cost.

Accidental Death Benefit

If death occurs as a result of an accident this rider pays an amount in addition to the policy’s basic death benefit, usually double that mount up to a stipulated maximum.  There is a charge for this rider.  The question concerning its value has to do with the odds of death from an accident.  You are possibly better advised to purchase more basic term insurance instead of this rider (See my Blog of Aug. 19, 2013).

Children’s Insurance

This rider provides term life insurance on present and future children.  My Aug 17, 2012 blog covers this. The added charge for this rider is typically fixed regardless of the number of children one has.

Long Term Care

A Long Term Care rider would typically only be available attached to a permanent policy (as opposed to term).  It normally adds a multiplier to the basic policy that would be available as a pool of money for eligible LTC needs with any amount payable under the rider reducing the death benefit when it is paid.  Benefits paid under these riders may or may not be tax qualified as required to assure that payments are received tax free.  Always check this approach against buying a stand- alone LTC policy.

Coming up…life insurance for women.

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