You've figured out how much
you need, how many years you need it, how much you can spend and
what type of policy best fits your situation.
But your homework isn't finished yet. Now an array of life
insurance policy add-ons, called riders, must be considered.
"Riders can give policyholders additional benefits and increase
peace of mind that if something goes wrong, there's a Plan B," says
Shelley Fiore, an agent for Detroit Financial Group, a general
agency of the Massachusetts Mutual Life Insurance Co.
buy life insurance
, available riders vary by insurance company and policy, as do the
rules for how they work. Costs also vary and depend on many
factors, including your age, health and type of policy. We can't
list every option available, but here are some of the most useful
In case you become totally disabled
1. Waiver of premium rider
With this rider, you don't have to pay the premium if you become
totally disabled and can't work.
Fiore says she always suggests that clients consider it so "they
don't have to choose whether to put food on the table or pay the
Keep in mind the waiver expires, often at age 60 or 65.
2. Disability income rider
You collect a regular income from the insurance company if you
become totally disabled and can't work. The policy specifies the
amount of the income and whether it's paid for a certain amount of
time or for the length of the disability.
Some disability income riders pay out only if you became
disabled from an accident, while others pay on accident or
sickness, says Al Lurty, senior vice president of ING's U.S.
In case you need more insurance but your health has
3. Guaranteed insurability rider
This rider lets you purchase additional life insurance coverage
at a later date without undergoing a medical exam or providing any
evidence about your insurability.
Because you never know how your health could change, Fiore says
it make sense to consider the rider (if you're eligible) and think
you might want to buy more life insurance later. The option allows
you to buy additional insurance at certain intervals, such as every
three years, or at certain ages, Fiore says. When the option comes
up to buy more coverage, the insurance company considers your age
for setting the premium, but not your health.
"I've seen people with severe heart conditions or cancer get
additional coverage who otherwise would have been declined," Fiore
In case you want to convert term life to permanent
4. Term conversion rider
provides coverage for a certain period of time, such as 10, 15, or
20 years. Permanent life insurance, such as whole life or universal
life, provides coverage for your entire life, so your beneficiary
receives a benefit no matter when you die.
This rider lets you convert term life insurance into permanent
life insurance without undergoing a medical exam. Fiore says it's
especially attractive to young people starting careers and families
who need life insurance but don't have enough money yet to secure
all the coverage with permanent life insurance, which has higher
premiums than term life.
There will be a deadline for when you must convert, if you want
to change the term policy to permanent life insurance without
providing health information. Understand the convertibility
features of term life before you buy.
In case you become seriously ill
5. Accelerated death benefit rider
This has become standard in the insurance industry, Lurty says,
and is usually included automatically for free or offered at
nominal cost. The rider lets you collect a portion of the policy's
death benefit if you become terminally ill with a short life
expectancy, such as one year. The policy spells out how much of the
death benefit is available before death. Usually it's capped at
$250,000 to $500,000, Lurty says.
You can use the proceeds for anything, such as paying medical
bills or living expenses. Even though the insurer offers the rider
free, the company may charge a fee if it is exercised.
6. Critical illness rider
The insurer pays a lump sum if you're diagnosed with one of the
critical illnesses specified in the insurance policy, such as
cancer, heart attack, stroke, kidney failure and others. Instead of
reimbursing you for medical expenses, the way health insurance
does, the rider provides money to use for any purpose during the
course of treatment.
In case the unthinkable happens
7. Child protection rider
No one wants to consider the possibility of losing a child, so
all emotion must be set aside when considering a child protection
rider. Although the death of a child typically would not result in
income loss, as would the death of a spouse, the tragedy still
would have some financial consequences, which could be an
additional hardship for a bereaved family. This
rider provides coverage for final expenses in case the unthinkable
happens. The coverage generally can be purchased in units - for
example, $1,000 -- Lurty says, at a nominal price. Basic
information about the child's health is required for
In case you die from an accident
8. Accidental death benefit rider
If you die from an accident, this rider provides an additional
benefit on top of the policy's regular death benefit. The option is
often referred to as double indemnity when the additional payout
equals the original death benefit. Sometimes the rider also
includes additional payment for dismemberment. You would collect
money if you lost a limb or your sight. Life insurers will consider
your occupation and hobbies when determining premiums, Lurty says.
High-risk activities, like race-car driving, would boost the
In case you outlive your term life policy
9. Return of premium rider
"If you live to the end of the term, in exchange for paying the
premium, in most circumstances you get all your money back," Lurty
says. He notes that some companies use a separate rider where
others, like ING, write the return of premium benefit into a base
You pay a higher premium for the opportunity to get your money
back. The big question to consider: How does paying the extra cost
for the return of premium rider compare to investing that money and
buying a basic term policy instead?
To find the answer, subtract the annual premium for a basic term
policy from the annual cost of a return of premium policy. The
difference is how much you would have to invest each year during
the insurance term. Then calculate what annual rate of return you'd
need on that money to beat the amount you'd get back from a
return-of-premium policy. Remember, money from the return of
premiums is tax-free, but your own investment returns are taxed. In
some cases (depending on age, sex, tax bracket and other factors),
you'd need to get more than a 7 percent rate of return on your
investment to beat the return of premium policy, Lurty says.
There is no one-size-fits-all answer to whether any of these
riders are right for you. You'll need to weigh policy options to
find the best package for your needs.
"My best advice is to talk to a knowledgeable life insurance
agent to help make an informed decision," Lurty says.