Most of us, who have owned a life insurance policy for many years, may not be aware of additional benefits life insurance policies provide today. In fact, many policy owners do not really understand how life insurance riders work.
There are policies that offer additional protection to the main contract, and they are called life insurance riders. It almost sounds like the policy is the main vehicle and the riders are additional passengers . Or you may consider them like extra toppings on a pizza. In reality, riders can make a life insurance policy very powerful when the time comes to use these benefits. There are dozens of riders available you can add to your policy, but we will only focus on the most popular ones.
Waiver of Premium
This benefit is probably one of the oldest riders you will find in a life insurance policy. It mainly protects your policy from lapsing if you were to suffer from a disability, and you are not able to earn income for at least 6 months. Once this happens, the life insurance company will waive, or forgive your insurance premium starting month 7, and it will continue to do so as long as you are still experiencing the same disability.
Whether you have 1 child, 5 children, or more, most life insurance companies will let you insure all your kids younger than 19 years old for one low monthly premium. You can obtain this type of life insurance rider in the form of units, and on the average, you can obtain up to $25,000 per child. Typically, you can expect a very trivial increase to your monthly premium, and your children will be insured until they reach 25 years of age. Additionally, most life insurance companies will offer conversion options to your children, so they can increase their coverage as adults without strict medical requirements.
Accelerated Benefit Riders
Many of us do not want to think about future medical issues, especially long and traumatic health issues like: Heart disease, cancer, strokes, among others. Fortunately, you can obtain a life insurance product which includes additional benefits in the form of accelerated benefit riders. And the best news is, most insurance companies offer them to you at no extra cost. Typically, there are 3 accelerated benefit riders:
1. Critical Illness. To qualify for this living benefit, you must suffer from a major sickness including: Stroke, heart attack, Organ Transplant, and kidney failure. Most life insurance companies will accept a claim as long as you file within 12 months of the event. However, it’s important to mention that if you don’t have health insurance coverage, you may not qualify. The average accelerated benefit allowed is 25%. Or up $50,000. Read your policy for more details.
2. Chronic Illness. This living benefit is one of the most known riders, and it can prevent you from experiencing a major financial collapse. Additionally, you can accelerate up to 24% of the death benefit when you qualify for a benefit. To do this, you must be chronically ill, and you need to prove medically, you are not able to perform 2 of the 6 activities of daily living (ADL’s). These include:Bathing, continence, dressing, eating, toileting and transferring.
3. Terminal Illness. This rider is one of the first living benefit riders life insurance companies started offering. To qualify, your doctor must provide proof you are terminally ill, and you only have 12 months or less to live. Also, Some insurance companies pay out this benefit even if your doctor says you have 24 months or less to live. In fact, this is the most ideal policy to have. We highly recommend it. Terminal illness allows you to accelerate up to 90% of your death benefit, while you are still living! This can be one of the most power protections you can buy!
Return Of Premium
This type of life insurance rider started becoming very popular during the housing boom in the early 2000s. This is because it is a great way to protect your mortgage with the guarantee you will get all the premiums back you pay, in 15, 20 or 30 years, whichever term you pick. However, some policies do not provide a partial return of premium if you cancel early. This is the reason why it is so important you review your policy carefully before you sign a contract. Fortunately, our agency can provide you with policies that offer great partial refunds, up to 60% of your premiums, if you cancel halfway through your contract. Additionally, these policies offer a reduced paid insurance option, if you decide you want a life insurance policy of less value without additional premiums.
A lot of people are insured with short term disability through their job, but they may not be aware of the disability benefits some life insurance policies offer. Also, this is different from a comprehensive occupational disability policy some people buy to protect their income. For the most part, a disability income rider will offer a monthly income for 1 to 3 years, and it will be roughly 10% of the life insurance death benefit amount. For example, if you bought a $300,000 of death benefit coverage, then the maximum disability income you may be able to obtain is around $3,000 per month.
IMPORTANT: If you qualify to receive disability through worker’s compensation insurance in your state, your private disability insurance may be affected. Please review your policy carefully, or speak with your life insurance agent about any concerns or questions.