There are many different types of riders in insurance but the term itself can get very confusing. For instance, what exactly is a long term rider? How about a child life or a life rider? Why would anyone need one?
The most common riders in insurance policies are: lifetime rider, long term care, disability, and accident. Each of these has specific requirements for when it can be added to the policy. For instance, disability riders must be applied to life insurance policies, and accident riders must be applied to auto insurance policies. However, there are no riders that automatically apply to all types of coverage.
Standard insurance policies are contracts that the insured signs at the time of coverage. These typically have a fixed premium and a specific death benefit amount. The death benefit is most often an amount of money that the policyholder will receive upon the policyholder’s death from any cause. Many people prefer standard insurance riders because they provide them with the security of knowing they are covered for certain events, which is not the case with most other types of policies.
Long term plan add-ons are designed to supplement the basic plan. They can come in the form of a lump sum payment, a savings rider, a guaranteed renewable term plan, or even a transition rider. A lump sum payment is paid to the beneficiary, usually making it an inexpensive way for the beneficiary to obtain cash for burial expenses. Savings riders provide money that the beneficiary may use for various things including home or auto repairs, education, estate planning, and other financial security needs. Guaranteed renewable term plans offer a specified amount of time to pay premiums without the fear that the policy will become ineffective.
A life insurance rider is generally used to provide coverage for an existing life insurance policy. Some of the most popular riders include a payment guarantee rider and/or a terminal benefit rider. A payment guarantee ensures that the policyholder will receive the full amount of premium payments should they die before the policy expires.
Another popular type of life insurance rider is a terminal benefit rider. This type of rider provides coverage for medical and funeral expenses that occur after the policy has expired. Typically, this type of rider is preferred by families who expect their loved one to live a long and productive life. In some cases, riders like this can also help ensure a family of four receives fair and consistent benefits upon death. In addition, many life insurance policies offer coverage for a dependent spouse or children in situations where both parents are unable to provide monetary support.
One type of critical rider is a chronic illness rider. Often referred to as CMT, this rider provides protection against risks associated with particular illnesses. A common example is Alzheimer’s disease. A critical rider is frequently required when insuring a senior who is at high risk of developing a serious illness in the future. Examples of critical life-altering illnesses include cancer, HIV, and diabetes.
Finally, many riders are offered to help families reduce premiums associated with existing health insurance policies. One example of this type of rider is the wellness payback plan. This type of rider allows the insurance company to reduce benefits when the health of a policyholder changes. For example, if a policyholder begins smoking cigarettes, the benefits provided under the former policy may no longer be appropriate. However, if the smoker starts following a healthy diet, she may be able to continue receiving her benefits.