Life Insurance Policy Riders
By: Elizabeth Silvestri, CFP®
The Henssler Financial Group Position Paper
By: Elizabeth Silvestri, CFP®
The Henssler Financial Group Position Paper
Life insurance policy riders are provisions which can be added to an insurance policy to extend the benefits that are payable for that policy. When considering various riders, those purchasing life insurance should check with the company offering the insurance to determine the impact a rider will have on premiums. This article will examine the more important optional provisions available with a life insurance policy.
Accidental Death Rider
Under this provision, if the death of the insured is caused by an accident and the death is within 90 days of the accident, an additional sum equal to the amount of the rider will be paid. The premium for this rider is not very high because most deaths do not fall under this category. Death from an illness is more common than death from an accident.
Common Disaster Rider
Under this provision, a settlement of policy proceeds is withheld for a specified number of days after the insured's death. Any surviving beneficiary who dies within that period is considered to have predeceased the insured.
Conversion Provision Rider
Under this provision, the insured is given the option to exchange a term contract for some type of permanent insurance without having to provide evidence of insurability.
Disability Waiver of Premium Rider
Under this provision, the insurance company agrees to waive the entire premium or the monthly charges, whichever applies, if the insured becomes totally disabled in accordance with the provisions in the contract. This is usually before a certain age (i.e., 65). The premiums do not have to be paid by the owner of the policy, and the policy coverage is not terminated. Coverage continues as if premiums are being paid.
Family Income Benefit Rider
Under this provision, the life insurance company pays the death benefit and a monthly income to the family for the remainder of the duration of the family income arrangement (as determined in the policy). For example, if a family has a 10-year family income arrangement, the life insurance company pays the family's monthly income for the rest of the covered time after the insured has died. Payments can be made monthly or in a lump sum.
Guaranteed Insurability Rider
Under this provision, the insured is allowed to purchase additional specified amounts of insurance at stated intervals without providing evidence of insurability. The rider gives specific dates on which additional life insurance policies can be bought. The older the insured, the fewer dates the policy owner has to purchase additional life insurance. This can be a beneficial provision for a person who has medical problems in their family or expects that his or her health may change in the future.
Renewability Provision Rider
Under this provision, the insured is guaranteed the right to renew a policy for a specified number of additional periods. This provision is available with renewable term insurance.
Spendthrift Clause Rider
Under this provision, the beneficiary is denied the right to commute or assign interest in the policy proceeds paid under an installment settlement option. It must be requested in writing.
All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products and this overview is not to be construed as an offer to purchase any insurance products.