Demystifying Term Life Riders

How could this rider benefit clients? 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 client 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, a client's beneficiaries would receive an additional lump sum payment if a client dies in an accident.

While the benefit of a larger cash payout may be helpful for some clients–especially as an accident implies an unexpected or untimely death, not all accidents are covered.

It's therefore important that clients 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 to clients is that, in the event of a catastrophic disability, it prevents their policy from lapsing.

However, it is important for clients to read the fine print on this type of rider as there is often a six-month waiting period before a client 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 a client 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.

Similar to the disability waiver of premium, in the event of a disability, premiums for the life insurance coverage could be waived.

Ultimately, some clients might be better served by purchasing a standalone disability insurance product.

However, for clients that might not have access to a disability policy, this waiver could be a good option.

Too often, clients face analysis paralysis when presented with too many options.

Wade Seward is head of distribution strategy at Haven Life.