Last Updated on by Tree of Wealth
When considering for life insurance, there are a lot of things that you need to keep in mind. Not only are there many different kinds of plans you can choose from but they can also be tailored to meet your unique needs and budget. For this reason, it is important to take your time and shop around for something that suits you.
Along with finding a good policy, you also have to consider insurance riders. These are optional supplemental packages that you can add on or integrate into your insurance policy when you get it. Insurance riders can be an awesome way to change up your policy and to further customize it, in order to support your lifestyle. There are various kinds of riders that you can choose from that have their own unique benefits.
However, before you begin adding riders onto your policy. You need to make sure that they work for you. Depending on your situation and budget, it may be more beneficial to not add any riders at all due to the additional cost. But if you use these packages wisely they can bring a whole host of advantages to the table.
The main purpose of insurance riders is to add supplemental coverage to your life insurance policy. This is a great way to expand the coverage of your insurance plan to incorporate more situations and unexpected events. Some of these riders come included for free, such as a term conversion rider. However, other riders, such as the waiver of premium insurance riders, will cost you more and they can be difficult to obtain.
Deciding on whether or not you should get a rider will depend on a multitude of aspects such as: the coverage you want, your premiums, budget, and the kind of rider you are looking for. So, are they worth it for you?
This is a question only you can answer. This is because not all life insurance riders are made equally. Some are going to be completely worth it because they are free, so there is no reason not to have them but then there are some that are quite costly. In order to decide if they are worth it for you, let’s look at the different kinds of insurance riders you can get:
Family Insurance Riders
Family insurance riders provide supplementary coverage for your family members, such as your spouse and kids. These riders will give you a payout if one of the members of your family happens to pass away unexpectedly.
Spousal Insurance Riders
This rider will take into account the income your spouse makes or the cost of childcare, if they are the ones taking care of the children while you are working. If they pass away, you’ll receive a death benefit that will equal the amount of income lost or the resources needed to take care of your child without the help of your spouse.
This rider is typically cheaper than getting a separate life insurance plan for your partner but that is because they’ll receive much less coverage. If your spouse has a full-time career, it is usually better to just get a separate plan for them. That way they have full coverage, to ensure complete financial protection of the household.
However, this insurance rider may be a good idea for spouses that stay at home or do not make that much money. This way you can still get additional coverage without having to pay for two premiums.
Child Insurance Riders
Typically, children do not even need life insurance because they do not make an income and they have no dependants. However, people still get their kids life insurance because it will not only ensure lower rates but it will also include any medical conditions that they may get later in life. This way parents can lock in a good rate for their kids and they won’t have to worry about dealing with pre-existing conditions when they get older.
Child insurance riders are something you should still definitely consider. This is because the additional costs are only around $5 to $7 per month but if something were to happen to your child, it will provide the resources you need to cover their funeral and other expenses.
These riders also include all of your children! You can add them onto the policy as young as two weeks old and the term will end once they become eighteen.
Accelerated Death Benefit Insurance Riders
The accelerated death benefit insurance rider is quite interesting as it provides you with financial protection when you are still living. This type of rider will siphon money out from your death benefit and send it to you, in order to pay for expenses during unexpected situations.
The main purpose of this rider is to assist individuals who have a serious illness and lost their ability to take care of themselves. There are different kinds of accelerated death benefit riders, such as:
Critical Illness Insurance Riders
Critical illness insurance riders will provide benefits to cover treatments for a number of serious illnesses that are specified in your policy. The conditions that are usually covered include stroke, heart attack, kidney failure, amyotrophic lateral sclerosis, and cancer. Before you get this rider, it is important to make sure that the conditions you want will be covered.
If you are afflicted with a critical illness, this rider will activate and provide a payout accelerated from your death benefit. If you pass away, your beneficiaries will get whatever is left over.
Terminal Illness Riders
The terminal illness accelerated death benefit insurance rider will provide a payout if you are stricken with a terminal illness. This rider is typically included in most life insurance plans or embedded in the main plan itself. So, this is something worth checking out when you are looking to get a life insurance policy.
This rider covers health conditions that give a life expectancy of around six to twelve months. The payout can be used to pay for end of life care but you can actually use this money for whatever you want. Many insurance providers even recommend that you take the money and use it on a vacation or to do the stuff you’ve always wanted to do. It is important to take note that you will not receive a lump sum but rather you’ll be sent money as needed. Then your family or beneficiaries will receive the rest once you pass away.
Disability Income Riders
The disability income rider or waiver of premium insurance rider, waives your life insurance payments if you are seriously disabled and can no longer make an income. Every life insurance provider is different though and they have their own definitions of what a serious disability is. This is something you’ll want to ask your insurance provider. Not a lot of insurers have this rider. Tokio Marine has this rider (Protect 1 lite) available in their Term Insurance. This rider will actually replace the income you’ve lost.
With CareShield Life and its supplementary plans, making full use of the CPF Medisave be another option for Disability income, but that is leaning more towards Long-Term Disability Care.
Read More: Tokio Marine Term Assure II
Chronic Illness Insurance Riders
Another kind of life insurance rider available to you is the chronic illness insurance rider. You can recieve accelerated benefits while still living if you are unable to perform two of the six activities for daily living, such as: bathing, dressing, eating, continence, transferring, and toileting. You will need to be certified by a medical professional before you can receive your benefits.
Accidental Death and Dismemberment Insurance Riders
The accidental death and dismemberment insurance rider or AD&D is designed for individuals who have dangerous hobbies, jobs, or live in a risky environment. These riders can be costly but they will pay out in the event that you lose a digit, limb, or even perish in an accident. However, the parameters that the injury or death has to abide by are incredibly strict and you may end up paying for nothing. This is a rider that you’ll typically want to avoid getting.
Long-Term Care Insurance Riders
You can transform your life insurance plan into a hybrid long-term care policy by integrating a long-term care insurance rider. This rider is similar to the chronic illness insurance rider because a medical professional has to certify that you are unable to perform two of the six activities for daily living, which are bathing, dressing, eating, continence, transferring, and toileting. However, this rider is specifically designed to ensure you are covered for the expenses associated with long-term care.
This rider is fairly expensive but it can be worth it depending on your situation. This is because it may provide residual benefits that are in excess to the original value of your policy. Which means, if your long-term care expenses are higher than your death benefit, the policy will keep paying for your care until the day you pass away.
The long-term care insurance rider can be a huge benefit if you need caregiving services, especially at home. This kind of care can be extremely expensive so this rider can be useful but it can also be a risk because you may never need long-term care.
Benefit Structure Insurance Riders
The benefit structure insurance rider can change your policy in various ways, such as:
Term Conversion Insurance Rider
The term conversion insurance rider allows you to convert your term life insurance plan into a permanent policy. It can be a good idea if you still want life insurance, once you are coming up to the end of your term. This rider will extend your current policy til the end of your life at the cost of an increased rate.
However, if you want to extend your policy permanently, this is a good option as it is cheaper than getting a new plan because of your age and health. You also do not need to take a medical exam if you go with a term conversion.
Return-of-Premium Insurance Rider
The return-of-premium insurance riders will refund the money you paid for your premiums, once you outlive your insurance policy. The catch is that this rider is extremely expensive. They commonly cost three times more than your original premium because the insurance company is expecting to refund you once your term is over.
It may sound worth it because you will just get your money back in the end but you still have to pay a large amount of administrative fees, so you still lose out. It is a better idea to simply continue paying your relatively low premiums and then investing the money you’d be paying for the return-of-premium rider into a retirement account, this way you can actually earn some interest.
If you decide to go with a term life insurance policy, it is important to check it thoroughly because some plans are sold with a return-of-premium insurance rider already attached. You can end up saving a lot of money by avoiding these policies, so do your research.
Guaranteed Insurability Rider
One of the more useful life insurance riders is the guaranteed insurability rider. This will allow you to increase your death benefit at predetermined milestones such as a certain age, marriage, having a child, etc.
This is great because when you first get your life insurance plan, you may not need a lot of coverage. However, as life goes on and you start having children and expenses start going up, you may want to bump up your death benefits.
The guaranteed insurability rider does increase your premiums, but your health won’t be considered so you can increase coverage with pre-existing conditions and you do not have to worry about doing another medical exam. You can get this rider on universal and whole life insurance and it is something to definitely consider.
Every life insurance rider has its own pros and cons, so you’ll need to do your homework and figure out what will work best for you. Because some riders may be great for some people but may not be useful for you. Consider your lifestyle, budget, how dangerous your life is, and how much your family or beneficiaries rely on your income. This will go a long way in helping you decide what kind of life insurance riders will work for you or if you prefer not to have any at all, besides the free ones of course.
Just remember that the main benefit of an insurance rider is the additional protection it offers, on top of your current policy. This ensures that you are able to provide yourself a better financial safety net during unexpected events at the disadvantage that many riders are fairly costly. Which is something you’ll have to weigh yourself, depending on your unique situation.
It is also important to know that you cannot add a rider to an existing life insurance plan. You can only attach riders when you are first getting a policy. So, if you are interested in getting riders this is something you will want to talk about when you are still making a deal with your insurance provider.
If you do not have a life insurance policy yet, this is a great time to check out the different insurance providers and see what they are offering. Compare their rates and coverage. Insurance companies are not made equally, so take your time and see who will work with you to get you the policies and riders you want, at the budget your wallet is happy with.
Feel free to get in touch and our partnered Financial Advisor can work with you to plan better.