In our previous post we explained what Riders and Endorsements are and gave some examples of these on a P&C policy. Today we’ll talk about riders on Life Insurance products.
Remember, a ‘rider’ is a temporary addition to an insurance policy that can be added or removed that does not change the original benefits stated in a policy and an ‘endorsement’ is a permanent change to increase benefits to an existing policy and both result in additional premiums.
Child Term Rider: This rider gives an insured the opportunity to cover his or her children and/or grandchildren on his/her personal insurance policy. A CTR is a single amount of coverage (say $10,000) for every child listed on the policy and covers each child until he/she turns a certain age (usually 23 or 25). An Endorsement to a CTR would be done to add a newborn to an existing policy containing a Child Term Rider.
Spouse Term Rider: Much like the Child Term Rider, a Spouse Term rider covers the insured’s spouse with limited coverage (again say 10K) until either the spouse or insured reaches a certain age. I’ve seen policies that cover a spouse until the spouse is 65 or 70 and I’ve seen policies cover the spouse until the insured turns 65 or 70.
Accidental Death Benefit Rider: Increases the amount of insurance paid to your beneficiary in the instance of an accidental death in lieu of death by natural causes. Usually double the face amount and normally drops off when insured reaches a certain age (60 or 65).
Accelerated Death Benefit / Critical Illness Rider: Some insurance policies offer this as a way to receive a percentage of the face amount of your insurance policy in advance of death, if diagnosed with a terminal illness. EX: An insured diagnosed with a terminal illness with life expectancy of less than 12 months may receive $50,000 of a $100,000 policy in advance of death. Continuous payment of premiums are required to keep the policy in force, and upon death of the insured, the remaining face amount will be paid less the amount of the advance plus interest.
Waiver of Premium Rider: In the instance of disability, life insurance premiums will be waived. Usually drops off of policy at age 60 or 65.
Guaranteed Insurability Rider: Allows an insured to purchase additional life insurance at standard rates regardless of health.
Guaranteed Conversion Rider: Allows an insured to convert from Term insurance to a Whole Life policy regardless of health or occupation. In most instances this is part of a STR and/or CTR rider and guarantees the spouse or children the right to purchase insurance on him/herself at standard rates regardless of health or occupation on or before the rider expires.
Return of Premium Rider: Offered on Term Life policies which guarantees a return of your premiums paid in if you outlive the policy term. Sometimes includes a plus interest clause.
These are just a few examples of riders offered on Life Insurance policies. If you’d like more information on what your current life policy offers, OR if you’re in need of life insurance, give us a call!
Until next time remember….One of the best ways to show your love is by purchasing life insurance!
Tommy Curtis and Staff
This material has been provided for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
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