What is a Rider on a Life Insurance Policy?

Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

When you purchase a life insurance policy, you can also purchase additional options called riders, which allow you to customize your life insurance policy to suit your needs. Read this lesson to learn about some of the riders available to you.

What Is a Life Insurance Policy Rider?

Meet Sam. He's currently shopping around for the right life insurance policy for him and his family, including his wife, two kids and his dog. A life insurance policy is an insurance policy that pays the person you designate a certain amount upon your death.

Sam meets with his insurance agent, Joe, and he tells him about the basic life insurance policies that he can purchase. He can choose between term life insurance, which is temporary coverage, or he can choose permanent life insurance, which will cover him for life. Sam can also choose different coverage amounts depending on his needs.

Then, Joe mentions to Sam that he can also add various riders to his life insurance plan. A rider, Joe explains, adds options to customize an insurance plan. Joe shows a few rider options to Sam to give him an idea of what's available. Sam will need to pay an additional amount per month for these riders.

Accidental Death Rider

Joe first mentions the accidental death rider, which adds an additional benefit amount in case Sam dies from an accident. This additional benefit amount is in addition to the life insurance coverage amount. So, whoever Sam decides is the beneficiary of the life insurance policy will receive the life insurance coverage amount in addition to the accidental death benefit amount.

Disability Waiver Rider

Next, Joe mentions the disability waiver rider, which protects in case of disability. In the case Sam gets totally disabled for longer than six months, this rider will waive the premiums that Sam needs to pay to keep his life insurance policy going. Most of these riders end when you turn 65.

Guaranteed Insurability Rider

Another waiver is the guaranteed insurability rider, which allows Sam to renew his life insurance without giving proof that he is insurable. Joe explains that Sam needs to pass a health exam since this is Sam's first time getting life insurance. If Sam purchases this rider though, if and when he needs to renew his life insurance policy, he won't be required to undergo a health exam or otherwise prove that he is healthy enough to be covered. This rider guarantees that Sam will get a renewal.

Cost of Living Rider

Another rider that might be useful is the cost of living rider. This rider automatically increases the value of the life insurance based on current inflation. So, if something happens to Sam 15 years from now, his life insurance policy will pay more than what he is currently covered for since it will now take into consideration the inflation that happens over the years.

Accelerated Death Rider

Next, Joe explains the accelerated death rider, which is useful if Sam becomes terminally ill. When this happens, if Sam has this rider, then he'll be able to access his life insurance coverage before his death. Many life insurance policies automatically include this rider, but some do charge a small monthly fee for it.

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