Just as there are many different insurance providers and policies out there, there are also many different riders as well. A rider is an extra feature that can be added on to a life insurance policy so that it becomes better suited to the insured person’s needs. So, what do you need to know about riders?
Each insurer will offer different riders, and while they may sound the same, each rider offered may differ depending on the provider. This makes it very important to read the terms and conditions. Most providers list their terms online. For example, the GIO website contains details about their terms and conditions.
The price of each rider will also differ. Usually each rider will cost about 5-10% of the base policy price, but there really is no limit on the cost. You can usually choose how many riders you would like to add as well, but again, this will depend on how deep your pockets are, and how many add-ons you think you actually need.
Here are just some of the many riders available.
Return of Premium Rider
Many people worry that they will pay a huge amount into their life insurance and not actually get anything out of it. This can happen if you choose a term policy and you outlive it. It simply means you lose all the money you paid in when the policy expires. Choosing this rider can change all that. If you happen to outlive your policy, then this rider will ensure you get back all the premiums you paid in.
Critical Illness Rider
This rider will pay out a lump sum from your policy should you be diagnosed with a critical illness. Each provider will have a list of critical illnesses that ensure a payout, such as cancer, stroke, or heart attack. The payout can be used for anything (unlike medical insurance, which will only pay off your medical bills). It could be used for specialist treatment overseas, paying off bills, or making up for lost income.
Accelerated Death Benefit rider
Again, this offers a benefit if you become sick while the policy is current. If you are diagnosed as terminally ill with a short life expectancy, this rider will offer an early payout from your policy. Each insurer will have different conditions for this rider, and the payout will usually be capped at around $250,000 to $500,000. Again, it can help to pay for specialist treatment or care, or for home or car modifications.
Term Conversion rider
Many people choose term life insurance policies because they tend to be cheaper than permanent policies. However, as previously mentioned, with a term policy, you can run the risk of outliving your policy and losing all the money you paid in. This rider allows you to convert a term policy into a permanent policy. Just bear in mind that there may be a deadline for the conversion.
Disability Income rider
If you become disabled and cannot work, then this rider will provide a regular income. Check the conditions to find out whether the payments are only offered for a certain length of time, or for the length of time spent disabled. Also check whether the rider covers disability from accident, illness or both.