Life Insurance Policy Riders

Question 1

what is a rider

Answer 1

An amendment or rider modifies conditions of the policy by expanding or decreasing its benefits, or excluding certain conditions from coverage, and are at the option of the insured.

Question 2

Disability Riders
Waiver of Premium

Answer 2

If the insured becomes totally disabled, the insurer will waive premiums for the duration of the disability or the end of the policy, whichever occurs first. To qualify for the waiver, the insured must be disabled for a waiting period of 3-6 months (90 days-6 months).

Unless the insured is still disabled, the Waiver of Premium rider drops at age 65.

Question 3

Payor Benefit (Waiver of Payor’s Premium)

Answer 3

If the payor (policyowner) dies or becomes disabled and is unable to make the premium payments, the insurer will waive the premiums payments for a specified period of time. Because this rider is commonly added to a juvenile policy, the payor (usually a parent) typically must show evidence of insurability before the rider can be added to the policy.

Question 4

Disability Income Benefit

Answer 4

In the event of total disability, and after an initial waiting period, such as 6 months, premiums are waived and the insured is paid a monthly income. The monthly disability income benefit is typically limited to a percentage, usually 1% of the face value. The benefit paid from the rider does not reduce the death benefits paid out upon death.

Question 5

Waiver of Cost of Insurance

Answer 5

A rider that waives the deduction of the monthly cost of insurance and expense charges associated with a Universal Life type policy while the insured is totally disabled, usually after 6 months of continuous disability. Typically, the disability must occur prior to a stipulated age.

Question 6

Term Riders

Answer 6

Term riders may be attached to any permanent , interest sensitive, or term policy to provide additional insurance protection for a fixed period of time.

Question 7

Spouse (Other Insured) Rider

Answer 7

This type of rider provides level term coverage on the life of the insured’s spouse. Under the basic policy, this rider also provides a conversion provision that permits the spouse to convert to permanent coverage without evidence of insurability prior to the termination of the rider or upon the death of the insured.

Question 8

Child Rider –

Answer 8

Provides level term coverage on the life of all of the insured’s children. This rider is usually offered at one premium rate and may cover newborns after 14 days of life. Adopted children can be added to the coverage without increasing the premium. The children have coverage to a specified age (21 to 25) and are usually given the option to convert to a permanent policy without evidence of insurability.

Question 9

Family Rider –

Answer 9

This is a combination of writing both the Spouse and Child Rider on one policy. This may be written as a policy or a rider; in the market today, it is normally written in the form of a rider. Usually family riders are sold in units (packages) of protection, such as $5,000 on the main wage earner, $1,500 on the spouse, and $1,000 on each child.

Question 10

Nonfamily Rider

Answer 10

Covers an additional insured with an insurable interest, such as a business partner.

Question 11

Accidental Death Benefit (Double or Triple Indemnity)

Answer 11

In the event of a claim, the policy normally pays double or triple the face amount if death was a result of an accident.
This rider may be called a multiple indemnity rider

Question 12

Accidental Death and Dismemberment

Answer 12

This rider provides a benefit in addition to the base of the policy. The rider pays 100% of the amount of the rider, known as the principal sum, upon accidental death. If the insured suffers an accidental dismemberment loss, such as loss of a limb or eyesight, the rider pays 50% of the rider amount, known as the capital sum. Double dismemberment benefits (loss of 2 limbs or total eyesight) are provided at 100% of the rider.

Question 13

Guaranteed Insurability

Answer 13

Allows the insured to purchase stated amounts of additional insurance every 3 years based on certain ages (specifically 25, 28, 31, 34, 37, and 40), events, or specified dates without evidence of insurability, up to a maximum age, usually 40

Question 14

Return of Premium

Answer 14

This rider uses Increasing Term insurance to provide coverage equal to the amount of premiums paid. If the insured dies within the term, the beneficiary would receive the face amount of the policy plus the benefit of the rider, equaling the total amount of premiums paid.

Question 15

Return of Cash Value

Answer 15

Increasing Term insurance equal to the cash value. This rider provides the payment of term insurance equal to the cash value amount at time of death. However, this does not relieve the obligation to pay loans from the claim proceeds at time of death.

Question 16

Cost of Living (COL)

Answer 16

The cost of living rider enables the insured to purchase more insurance each year to help offset increasing insurance needs due to inflation. The amount that can be purchased is based on increases in the cost of living index. This additional coverage is usually available at low rates, and evidence of insurability does not need to be provided for such increases.

Question 17

Accelerated Death Benefits Riders

Answer 17

Accelerated Death Benefits provide for an early payment of a portion of the face amount prior to death. This rider provides tax-free access to policy benefits based on an insured qualifying as terminally ill (death is expected within 12-24 months), or chronically ill, such as permanent confinement in a nursing home, long-term care if they are unable to perform activities of daily living or another other acute illness that requires long-term care, such as AIDS or the need for an organ transplant.

Question 18

Living Needs Rider

Answer 18

allows the early payment of a portion of the face amount before death if the insured become terminally ill, usually with 12-24 months life expectancy. Typically, it is an amount equal to 50 - 90% of the policy’s face amount. Upon death, the early payment will be deducted from the benefit paid to the beneficiary. The rider is normally provided without a premium charge because it is an advance of the death benefit.

Question 19

Long-Term Care Rider

Answer 19

Provides up to 100% of the policy benefits if the insured qualifies for long-term care benefits as defined in the rider, such as the inability to perform 2 out of 6 activities of daily living. Any payout is an acceleration of the life insurance death benefit, meaning it will reduce the ultimate death benefit payable to the beneficiary. The amount of protection is determined at the time of policy purchase. Long-term care benefits are paid income tax free after the insured meets the qualifying requirements.

Question 20

Exclusions and Restrictions

Answer 20

The accelerated death benefit cannot contain exclusions or restrictions that are not also exclusions or restrictions in the policy. Typical exclusions apply to suicide, intentional self-inflicted injury, war, or engaging in illegal occupations or activities.