When most of us buy life insurance, we aren’t thinking of ourselves. We’re thinking of those we love, protecting our families if something tragic were to happen to us. This is the primary reason for purchasing life insurance.
Life insurance riders are typically add-ons to the policy that personalize coverage to your unique needs. Some riders are inherent to a policy and others are available at additional cost, and/or may involve a fee when exercised. Some life insurance companies offer policies with living benefits riders, benefits that can offer value to you while you’re living. A living benefits rider provides added services that can be accessed while you’re living. A common living benefits rider is an accelerated death benefit. Another example is Haven Life’s Plus rider, which is expanding the reach and value of these policy enhancements on term life insurance.
Living benefits riders that make life less hard
With term life insurance, the interaction that most people have with their life insurance company is a monthly bill for 10 to 30 years. You pay your monthly premiums and hope your family will never have to use it. For the team at Haven Life, that seemed like a missed opportunity.
That’s why Haven Life put a new twist on the typical living benefits rider with Haven Life Plus. Included in the cost of each Haven Term policy, Plus provides eligible policyholders with benefits to help them live healthier, fuller and more protected lives.
Access to the following services are available through Plus: :
- A digital solution for creating legal wills for you and your partner at no charge through Trust & Will. The service also includes a healthcare power of attorney and directives.
- A secure online safe deposit box for storing, managing and sharing your family’s important documents at no cost through LifeSite
- A 15% discount voucher for family health services at MinuteClinic, inside CVS Pharmacy and Target stores
Accelerated death benefit
As previously stated, one of the most common living benefits is known as the ‘accelerated benefits rider.’ Let’s say you become terminally ill while you have an active life insurance policy. You’ll certainly be glad to have the coverage for your family members. But in the meantime, loss of income or increased expenses (such as medical bills that are not covered by insurance) could deplete your family’s assets or even push you into debt before you pass. Your debt would then need to be settled by your estate.
An accelerated benefits rider allows you to tap into some of your coverage to make your last days easier. Typically, you need a diagnosis that gives you two years or less to live. A portion of the proceeds are paid out to you to help cover medical bills, pay off shared debts, getting your affairs in order, or even memorable experiences with your family.
Most basic life insurance policies offer this rider as an inherent benefit of your policy, which means it’s included in the price of your monthly premium. But not all do. And the amount of your policy that insurance companies allow you to access for this type of benefit varies. For example, Haven Term policyholders can access 75% of their benefit, or a maximum of $250,000, whichever comes first. Accessing these benefits reduce the payout to your beneficiaries upon death dollar-for-dollar.
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Disability waiver of premium
Waiver of premium is another common type of living benefits rider that covers your policy premiums if you become too sick or injured to work. This helps prevent your life insurance policy from lapsing. Usually, this rider can be added at an additional fee to your monthly premium.
The Social Security Administration found that one in every five Americans lives with a disability, so the possibility of being unable to work at some point due to disability is more common than you might think.
Depending on the rider, it could cover you for 12 months in which you can’t pay, or up to a certain age. The individual terms of the rider vary from carrier to carrier. Additionally, There are no fees associated with utilizing this benefit (that’s what the added premium cost covers.) But, there is a six-month waiting period before you can file a claim to use this rider.
Other types of living benefits riders
While the accelerated death benefit is the most common type of living benefit rider, there are other more unique types.
A long-term care rider can cover the cost of a nursing home or in-home nurse as you age. Usually attached to the more expensive whole or permanent life insurance policies, this coverage can replace separate long-term care insurance.
Then there’s the disability income rider. This rider acts like long-term disability insurance, but instead of buying a separate policy, it’s a rider on your life insurance coverage. If you were to become disabled and unable to work, the life insurance company would pay you a monthly stipend to replace a portion of your income. Additionally, premiums for the life insurance coverage are waived while the policyholder is receiving disability benefits.
With the critical illness rider, benefits are paid to the policyholder to cover treatment for illnesses specified in the policy contract, which could include any number of critical medical conditions that are likely to limit your life expectancy. When the policyholder dies, his or her beneficiaries will receive a reduced death benefit that reflects the money already used for medical care.
In addition to these more traditional living benefits riders, some life insurance companies are using riders to introduce interactive programs.
John Hancock, for instance, offers Vitality — a living benefits rider where customers can get product discounts and rewards for reporting fitness and health data to the company on a regular basis. This includes access to health and activity information like steps, workouts, food purchases, doctor visits and more. The intent is to encourage policyholders to live healthier lifestyles. Customers do not have to opt-in to data tracking, but they will pay more in premiums. Keep in mind though: how this type of data will be used by John Hancock or other providers over time is still unknown, which has stirred up a bit of controversy with these types of programs.
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Finding the policy that works best for you
A living benefits rider is like a sidecar to your life insurance policy to improve your coverage while you’re still living. Depending on the rider, it can add enhancements to your coverage to add support to more areas of your life. Not every person needs every rider available to them — arguably, the best type is the one that doesn’t add to the cost of your monthly premium.
No one wants to read the fine print when buying a life insurance policy. But you don’t want to miss out on benefits that could make your life better.
Always ask your coverage provider what riders are automatically included with the price of your life insurance – like Haven Life’s included accelerated death benefits and Plus riders. You might find that the best life insurance policy could benefit you as well as your loved ones.
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Chelsea Brennan is the founder of Smart Money Mamas, a personal finance blog that focuses on family finance, investing, and reducing money stress. Chelsea is an ex-hedge fund investor whose work has appeared in a wide array of publications, including Forbes, Business Insider, and more.