Life insurance riders for changing needs at lower cost

by Shane Flait, ©2008

Underwriting is that part of a life insurance policy’s cost for evaluating the risks of insuring you specifically. Rather than beginning a brand new life insurance policy – with all its costs - when your needs change – you can often find a rider policy to add to your base policy for a minor premium. Riders can save you money since most of the underwriting costs were absorbed in your base policy.

Though rider policies give your added insurance benefits, you must read each policy rider carefully. Look for the exact conditions that need to occur for you to receive its benefit. The precise coverage, conditions, terms, and premium rate for each rider varies among different insurers. Sometimes, when a rider claim is made, it can terminate its future use while the base policy remains in effect.

Here are four popular riders and suggest what to watch out for:

1) The Guaranteed Insurability Rider is also known as the renewal provision. It allows you to purchase additional insurance coverage during a stated period without taking more medical exams. Use this rider whenever your insurance needs increase as for estate taxes or funeral needs. With it, you needn’t worry about passing the medical exam if your health declines. But watch out for this provision to terminate at a certain age.

 2) Waiver of Premium Rider provides that future premiums are waived if you – as the insured - become permanently disabled or lose income as a result of injury or illness prior to a specified age.  Watch out for what the insurer means by 'totally disabled'. This can be different from the social security disability definition.

 3) The Family Income Benefit Rider provides continuous family income upon your death. You should work out just how long and how much income you’ll need it that happens. Watch out for inflation effects to your policy.

 4) An Accelerated Death Benefit Rider allows you to use some of your death benefits if you’re diagnosed with a terminal illness. You may be able to receive some 25 to 40% of the base policy’s death benefit. Watch out for what definition of terminal illness your insurer uses. It may be more difficult to access this benefit than you anticipate.

 Ask for what other riders are available, how much the cost, and what precisely are the conditions that allow them to go into effect.

Shane Flait is a writer and educator. Get more info at www.EasyRetirementKnowHow.com