The essentials of life insurance are the coverage amount, premium and length of the term. These are built into every policy and their specifics usually draw the most attention with potential buyers. As well they should, because they are the most important aspects of any life insurance policy. But something that shouldn’t be overlooked is life insurance riders. Life insurance riders are optional features that one can choose to enhance their coverage at an increased premium. Here are some of the most common riders you will find on life insurance policies.
Guaranteed insurability option
This rider allows you to lock in your insurability by giving you the ability to increase the amount of coverage at a later date, without having to undergo medical underwriting again. It’s a suitable rider for those who are young and healthy and don’t need the coverage yet, but will need it in the future when there is a significant change in their lives, such as the birth of a child. It’s also beneficial to have in case your health declines, since it’s guaranteed to give you extra coverage without a medical examination.
Term riders are usually attached to permanent life insurance policies to provide extra protection during the initial term. Most people who purchase this like the idea of permanent insurance, but may not be able to stomach the premium, so they buy a lower face amount and supplement it with the term rider. The rider gives them more protection during their prime earning years when they need the most coverage. It can be dropped at any time without penalty.
Accidental death benefit
In case you are worried about dying from an accident, this rider will allow you to choose a death benefit to be paid on top of the primary coverage resulting from an accidental death. It’s much more common that people pass away from illness than accidents, and a death from an accident shouldn’t necessitate a higher payout, so we personally list this rider low on the list of priorities.
Disability waiver of premium
Approximately 1 in 3 Canadians under the age of 65 will be disabled for 90 days or longer¹. If you don’t have disability insurance, consider adding this rider to your policy. If you should suffer a disability, you will not be required to pay your premium for the duration of your disability.
Spousal or child term life insurance rider
These riders allow you to save on a policy fee by combining multiple death benefits on one policy. This is one way of saving with life insurance for multiple family members. For the child rider, the insurance company usually covers up to age 18 to 25, with the option of conversion into a standalone policy at expiry without evidence of insurability. This is another good way to lock in insurability while health is good, much like the guaranteed insurability option. Your children may even thank you in the future for adding this, depending on how healthy they are as adults.
These are just some of the more common riders available on life insurance products. Different carriers have different interpretations regarding how they are applied and the features that are offered. Some are only available when first taking out the policy, while others may be added at a later time. Speak to a licensed insurance advisor if you would like more information about life insurance riders.
¹CiA 86-92 Aggregate Table and 1985 Commissioner’s disability table A (Experience Table).
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