What is a term rider for life insurance?
Purchasing a term rider provides additional term coverage on top of your permanent life insurance policy, giving you a larger death benefit for a set period. For example, your base whole life policy might have a death benefit of $100,000 that will be paid out no matter when you die. You could purchase a term life insurance rider that allows for an additional $50,000 to be paid out if you die within the first 10 years of the policy.
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How does a term life insurance rider work?
Riders let you customize your coverage based on your needs, priorities, and goals. At the time you purchase a policy, you can elect one or several riders, which provide additional benefits, usually at a reasonable cost.
Generally, you might consider a permanent life insurance policy with a term life rider if your needs will decrease over time, but you want to maintain some life insurance until you die. The most common example is buying whole life insurance to provide for your spouse no matter when you die and adding a term life rider that would increase the payout if you die while your children are still dependents.
Or, if you and your partner don't anticipate having children, a term life rider could help pay for a mortgage or student loans if you die before your debt is paid off. That larger payout would no longer be necessary once the loans are paid off, and you'd still have permanent life insurance without the added cost of higher coverage.
Example:You estimate that you need $300,000 in life insurance over the next 10 years, but only need $200,000 thereafter. You decide to buy a $200,000 whole life policy with a $100,000 term life rider that is good for 10 years.
Note that, in general, permanent life insurance types are significantly more expensive than term life insurance policies and adding a term life rider will further increase your premium. If cost is your primary concern, you might instead consider a term life policy to cover your beneficiaries' immediate needs.
What are the benefits of a life insurance rider?
Life insurance riders make your life insurance policy more flexible and add useful features. For example, an accelerated death benefit rider can let you claim your death benefit yourself while you're still alive if you're diagnosed with a qualifying serious illness. Without this rider, only your beneficiaries would be able to claim your death benefit after you die.
What is a family income rider?
A family income rider is an optional add-on to your term life insurance policy. If you pass away, this rider will start paying out your death benefit in monthly installments to replace the income you provided for your family. You might consider this type of rider if you have a young family that depends primarily on your income or if managing a lump sum life insurance payout upon your death would be overwhelming for your beneficiaries.
There are also child and spouse term life insurance riders, which may be added to your new or existing life insurance policy. These riders will pay a small death benefit if your child or spouse passes away while the rider is active.
Are term riders expensive?
If you're considering permanent life insurance anyway and you know your beneficiaries' needs will decrease over time, a term life rider on a whole life policy can be cheaper than buying a standalone term life policy now and a whole life policy down the road. That's because life insurance rates increase as you age. Plus, purchasing permanent life insurance early on, rather than getting a term policy now and a permanent policy later, would allow you to build cash value for a longer time since term policies don't have that feature.
Can you adjust, add, or cancel a term rider once you have a policy in place?
Riders can generally be added during the application process, so it's important to evaluate your needs at the time you're purchasing the policy. Typically, you won't be able to add a term rider to a policy you already own.
Most companies and policies do allow you to remove a term rider from your permanent life insurance policy before the rider's term is over. This can be a way to save on your premium if you're sure you no longer need the increased death benefit — for instance, if you pay off the house early or your kids start supporting themselves sooner than you planned. Insurance companies aren't required to let you remove the rider, though, so check with yours before purchasing.
On the other hand, if you need flexibility to increase your death benefit over time, consider a guaranteed insurability rider.
Considering a whole life insurance policy?
You can get a whole life insurance quote online in just minutes. You'll be asked some questions, and you'll choose your death benefit amount and other policy details. You can also call 1-866-912-2477 to speak with a licensed Progressive Life by eFinancial representative who can help you find the right policy for you.
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