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Demystifying Life Insurance Policy Riders
Confused by life insurance riders? You’re not alone. But we can help.
When asking about a variety of life and health insurance products, a recent survey by ReMark found that term life insurance is the least understood product in the life and health insurance market. But in that lack of understanding lies an opportunity, a chance for us at Haven Life to help you better understand what term life insurance is, why it’s important, and whether it might be right for you and your loved ones.
Here, we break down one of the elements of term life insurance that has traditionally been viewed as confusing by customers: policy riders.
In this article:
What is a rider anyway
You might understand the basic concept of term life insurance — you buy coverage for a specific amount of time (or term length). If you, the policyholder, die during the policy’s term, your beneficiary receives a lump sum death benefit payment equal to the value of the policy. Simple enough.
But, while many improvements have been made to streamline how life insurance can be bought, many people are still unclear about the various associated rider options. For some, the term “rider” makes people think there are policy exclusions or caveats. However, in many cases, life insurance riders actually work in the policyholder’s favor.
To clarify things, it’s important to remember that, generally speaking, a life insurance rider is a feature that is in addition to the life insurance policy. In other words, riders can help applicants get the customized and personalized coverage they need.
Common, but confusing, riders
Once you understand the concept of a rider, it can be easier to sift through the various rider options to see which, if any, might make sense for you.
While each insurer is going to have their own rider offerings and policies, some of the more common riders you should expect to see include the following:
Accelerated Death Benefit
This type of rider has multiple names, and might be referred to as a living benefits rider or terminal illness benefit rider. But, regardless of what it’s called, the overarching concept is the same.
An accelerated death benefit rider is a provision attached to a life insurance policy that allows the policyholder to access a portion of the life insurance death benefit while they are still living. The caveat here is that this usually requires a policyholder to have a documented life expectancy of two years or less–hence the name “terminal illness benefit rider.” Additionally, how much of the death benefit a policyholder is able to access varies from policy to policy.
How could this rider benefit you? As corresponding medical care or end — of — life care for a terminal illness can be costly, accessing a portion of a policyholder’s death benefit could help cover some of those expenses. It can also help a policyholder settle affairs, so as not to financially burden loved ones when they pass — a primary reason people often buy term life insurance in the first place.
Accidental Death Rider
While the death of a policyholder as a result of an accident would generally be covered under the terms of a life insurance policy, an accidental death rider is an additive option. In addition to the policy’s normal death benefit payout, via this rider, yoru beneficiaries would receive an additional lump sum payment if you die in an accident.
While the benefit of a larger cash payout may be helpful for some — especially as an accident implies an unexpected or untimely death, not all accidents are covered. It’s therefore important that you check with their insurer about the terms and conditions of this rider, and ask explicitly what type of accidents are covered.
Disability Waiver of Premium
The name of this rider does a good job of explaining what it entails. Essentially, the inclusion of a Disability Waiver of Premium in a life insurance policy means that if a policyholder becomes totally disabled (in accordance with the terms set out in the policy itself), the insurer will waive subsequent premiums until the policyholder is no longer disabled. If it is a lifetime disability, premium payments will be covered until a certain age.
The benefit of this rider is that, in the event of a catastrophic disability, it prevents your policy from lapsing. However, it is important that you read the fine print on this type of rider as there is often a six-month waiting period before you can have their premiums waived, is usually only available for an additional fee, and there could be age or state availability limitations.
Disability Income Insurance Rider
Should you become disabled and unable to work, those who elect this rider would be paid a monthly stipend by their life insurance company to replace a portion of their income. Also, similar to the disability waiver of premium rider, in the event of a disability, premiums for the life insurance coverage could be waived.
Ultimately, some might be better served by purchasing a standalone disability insurance product (such as Haven Disability). However, for those who might not have access to a disability policy, this waiver could be a good option.
The Haven Life Plus rider
Eligible Haven Term policyholders can enjoy the Haven Life Plus rider, a suite of bonus features meant to benefit the policyholder while you’re still alive. This rider includes access to a fitness app, online trust and will services, secure online file storage and more — all at no cost, or at a discounted price. Learn more about Haven Life Plus here.
About Wade SewardRead more by Wade Seward
Our editorial policy
Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our editorial policy
Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.
Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.
Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.
MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.
Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit: https://havenlife.com/plus
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