Life Insurance

7 Common Life Insurance Riders Explained

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What is a rider in insurance? A rider allows you to customize and supplement an insurance policy to more precisely meet your needs. For example, you may add a rider to cover damage from an overflowing sump pump on your homeowners insurance, which usually isn't part of a basic policy.

Oftentimes, other types of insurance and savings methods may be a more cost-effective way for some individuals to achieve their financial goals.

One of the benefits to working with Ethos is that you may be able to save money by switching to a rider-free policy if you decide you don't need them.

While Ethos does offer the ADB (accelerated death benefit) rider at no cost, our policies are known to be straightforward, affordable plans that don't include these extra-cost riders. 

However, we're currently looking into ways to offer more riders to our plans in the future for an additional fee. 

Below, we'll examine 7 typical life insurance riders, so you can understand whether they'd apply to you when you're shopping for life insurance online or whether you're better off with a no-rider policy.

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1. Accidental death rider

This rider insurance pays out an additional amount to the policy's beneficiaries if the insured passes away from accidental death. It's often recommended for those working in more dangerous jobs, such as lumbering or police work. Usually, this is seen as a term life insurance rider as term insurance is more common for younger individuals in the workforce. Some accidental death riders also extend their payouts to accidents that cause dismemberment, such as losing an arm or leg. 

2. Chronic illness rider

If you're living with an illness that interferes with your ability to handle at least two "activities of daily living" tasks, or ADLs, a chronic illness rider on life insurance can be helpful. These include eating, dressing, getting out of bed, using the toilet, and other essential activities. This rider would give you regular payments, taken from the policy's death benefit, to help you pay for medical or other costs associated with your chronic illness. 

This is a similar rider to what Ethos offers: the accelerated death benefit (ADB) rider, which gives you an early payout on your policy if a doctor determines you to be terminally ill. 

3. Disability rider

Purchasing life insurance with a disability rider gives the policyholder a specified payout if they become disabled during the time of the policy. Usually, there will be some limitations to this. The policy will define what constitutes becoming disabled. Generally, it'll require that you're no longer able to work or can only work in a diminished way. Again, you'll most likely find term insurance with disability riders, as term policies are more suited to this type of rider.

4. Term conversion rider

A term conversion rider is a common insurance rider on term policies. At the end of your policy's term, you may convert it into permanent life insurance, such as whole life insurance for seniors. The premium rate may increase, but you'll have continued coverage that lasts as long as you live, allowing you to leave a legacy to your heirs. 

5. Child insurance rider

If you're faced with the difficult circumstance of losing a child, a child rider on your life insurance can help pay for funeral costs. It can cover multiple children, and it usually lasts from birth (or whenever you purchase the policy) until they reach the age of 18. Adding a child rider is different from purchasing a life insurance policy for your child. In that case, you're purchasing a whole life policy with your child as the insured. The premiums could be much higher than those of a child rider.

6. Waiver of premium rider

One popular life insurance rider is a waiver of premium rider. For a small, regular addition to your premium, you can ensure that your payments are waived if you're disabled and unable to work. There's no payout, as there is with, say, the chronic illness/accelerated death benefit rider Ethos offers. But if you meet the qualifications for a disability as determined by your insurance company, your policy will remain in force, even if you can't afford to pay the premiums.

7. Return of premium rider

One of the less common types of riders in insurance is the return-of-premium rider. It can be an expensive add-on to your policy, so determining whether you need it is crucial. This rider returns the amount you paid in premiums if you outlive your term life insurance policy. Note there may be administrative fees deducted, so you won't get back quite as much as you put in. 

A cheaper option can be to add a term conversion rider, so your policy continues after the end of the term, morphing into a whole life policy. 

Bottom Line

Riders can be helpful but it's important to deduce if they're a good fit for you. If you find riders confusing, remember that none of them are mandatory. 

At Ethos, it's easy to purchase a term or whole life policy simply by applying for life insurance online — no medical exam needed. Just answer a few simple questions about your health.

If you have questions or you want to find out more about the accelerated death benefit rider on our term life insurance policies, you can contact us by email, phone, or text, and we'll get back to you quickly with answers.

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