A policy rider is an optional benefit that can be added to a life insurance policy for an extra premium. Legally, it is defined as a document that amends the policy or certificate. It may increase or decrease benefits, waive the condition of coverage, or in any other way amend the original contract.
Some common examples of policy riders are:
- Accelerated Death Benefit Rider: Rider that allows payment of a portion of the face amount prior to the death of the insured, if the insured is diagnosed with a terminal illness or injury.
- Accidental Death Benefit: A benefit in addition to the face amount of a life insurance policy, payable if the insured dies as the result of an accident. Sometimes referred to as “double indemnity.”
- Annual Renewable Term Rider: Term life insurance that is “blended” into the policy, which reduces the premium and will reduce the cash value.
- Child Rider: Rider that provides insurance to the insured’s children.
- Cost-of-Living Rider: Benefit that can be added to a life insurance policy under which the policy owner can purchase one-year term insurance equal to the percentage change in the consumer price index with no evidence of insurability.
- Disability Income Rider: This rider, typically seen on older policies, pays a monthly benefit of 1% of the death benefit of the coverage, in the event of permanent and total disability.
- Guaranteed Insurability Option: Allows the purchase (optional) of additional coverage at certain intervals without providing evidence of insurability (no underwriting).
- Living Benefits Rider: A rider that allows insureds who are terminally ill or who suffer from certain catastrophic diseases to collect part of their life insurance benefits before they die, primarily to pay for the care they require.
- Other Insured Rider: Rider that provides coverage to an eligible business or family member other than the insured.
- Spousal Rider: Rider that provides coverage to the insured’s spouse.
- Waiver of Cost of Insurance Rider: Rider that waives the cost of insurance in the event the insured becomes totally and permanently disabled during the life of the policy. Generally applies to universal life policies.
- Waiver of Premium Rider: Provides that in the event the insured becomes totally and permanently disabled before a specified age, premiums on the contract will be waived during the continuance of the contract. Generally applies to term and whole life policies.
Keep in mind that many of these riders are more profitable for the insurance carrier. Each carrier only offers certain riders per policy.