The term “rider” is yet another term that is commonly found in life insurance policies. If you’ll remember, we previously learned that an insurance policy is actually a contract between the policy owner and the insurance company issuing it.
As a contract, the policy states specifically the rights of the owner and the insurance company. Once the policy is signed, the contract is complete. But, what if, after signing, the owner decides that he/she would like to get additional protection? An entire new contract (or policy) would need to be drawn up and signed by all involved.
This would be a poor use of time and money, so the rider was created. A rider, which is usually attached to a life insurance policy, refers to the extra coverage or protection offered by the insurance policy, aside from the primary coverage first indicated in the policy. However, since the rider was not originally covered in the policy, the insured or policy owner has to make an additional payment for any rider that might be added.
A life insurance rider can be in the form of a disability income, accidental or accelerated death benefit for the insured, a waiver of premium or a guaranteed insurability clause.
An accelerated death benefit means that when an insured has a terminal illness, he/she is allowed to collect a part or all of his/her death benefits while still alive. An accidental benefit rider means that an additional sum may be paid to the beneficiaries of the policy, if the insured dies in an accident. More to the point, the additional amount will only be paid if the death comes as a result of an accident and not for any other reason.
On the other hand, a disability income rider provision means that the insured is given an income in case he/she becomes disabled. The income or allowance would be given for as long as the disability exists.
A guaranteed insurability rider is a provision which allows the insured person to get another insurance policy, at a certain point in time and he/she would not be required to present or prove his/her insurability. This means that even if the insured becomes uninsurable during that period, he/she could still be issued the policy because of the rider.
The waiver of premium is the kind of rider commonly found in life insurance policies. An insurance contract is so strict that it requires continued payment of premium, no matter if the insured has the financial capability to continue paying. Failure to continue with the payment will cause the insurance to lapse. With a waiver of premium rider, the policy holder is assured that the insurance contract will continue, even if he/she becomes disabled and can no longer pay the policy.
Most people get insurance policies without taking the time to read the fine print. When the inevitable happens, they complain that they have been tricked into getting an insurance policy that is no good. To avoid this, you should always ask your independent agent to explain any provisions which you may not understand.
Some people, who are not aware of what an insurance rider is, hesitate to get the rider, as it has an additional price. However, if you are aware of the benefits that some of these riders can offer you, then perhaps you will understand why they can be so valuable! Be sure to consult your independent insurance agent for all of the information and answers that you ned to make a smart choice!