Policy Riders

Policy Riders

There are features available to a policy owner not required by regulation. These options are called riders and can be added to a policy (at extra cost) to make the policy better. The cost for these riders is very reasonable, considering the benefits offered, making them quite popular. They are available on most policies and include the following:

Waiver of Premium

If an insured becomes disabled and unable to earn a living, the waiver of premium rider will permit the policy to remain in force without requiring the policy owner to make premium payments. There is usually a waiting period after the onset of the disability before the rider becomes effective.

The payor benefit rider is generally used with juvenile policies, providing that premium payments will be waived if the parent, who is paying for the policy, dies or becomes disabled before the insured reaches an age specified in the policy.

Guaranteed Insurability (Additional Purchase Benefit)

This option makes it possible for a policy owner to purchase additional amounts of life insurance in the future, even if he/she has become uninsurable. It allows the purchase of additional coverage in specified amounts, at specified intervals, until the insured attains a certain age. Amounts of additional insurance and dates on which the option can be exercised vary by insurers.

Accidental Death Benefit

Sometimes called double indemnity, this option can be added to a life insurance policy for a small additional premium. The additional death benefit is usually equal to the face amount of the policy. For the benefit to be payable, the insured must die as the result of an accident. The accidental death benefit will not be paid if death occurs while the insured was intoxicated or committing a felony.

Cost of Living

The cost of living rider increases the face amount of your policy at the rate of inflation, to assure the policy owner that the death benefit will be adequate in future dollars.

Return of Cash Value

Many clients object to the fact that whole life companies keep the cash value upon death; as a result, insurers offer the return of cash value rider. This is actually a form of increasing term coverage that will pay an amount equal to the cash value of the policy in addition to the face amount of the policy at death.

Lesson Summary

Policy riders offer additional features to a policy owner beyond what is required by regulation. These options, available at an extra cost, enhance the policy’s value and are quite popular due to their reasonable pricing. Common policy riders include:

• Waiver of Premium: Allows the policy to remain in force if the insured becomes disabled, without requiring premium payments.
• Guaranteed Insurability: Permits the purchase of additional life insurance in the future, regardless of insurability.
• Accidental Death Benefit: Provides an additional death benefit if the insured dies due to an accident.
• Cost of Living: Increases the policy’s face amount over time to keep pace with inflation.
• Return of Cash Value: Pays an amount equal to the policy’s cash value in addition to the face amount at death.

Chapter Vocabulary