In many ways, they’re like optional features on a new car: they can add a lot more usefulness and can be affordable – but you may not necessarily want or need every last one. This article can help you understand your options by covering: 

Why life insurance riders are important

Life insurance policies last for decades – or even a lifetime – and you can’t really predict how things will change in that time. Your family may grow, along with your responsibilities. Your health could unexpectedly change. You may lose your ability to work at some point. The fact is, good and bad things will happen – but life insurance coverage can give you the ability to face an uncertain future with greater confidence. 

Whether you’re purchasing a term or whole life policy, riders can add flexibility and provide extra financial protection and support, even while you’re still alive. Generally speaking, whole life policies have more riders available and can be more customizable than term policies because they are designed to cover a lifetime of different possibilities

Term and whole life insurance riders and definitions

Certain kinds of riders, like a Waiver of Premium rider,2 are fairly standard and available from most major insurers; others are more specialized. After listing the standard rider types for each kind of policy, we’ll also discuss some of the specialized ones offered by Guardian to give you an idea of what’s available. In any case, before you buy a policy or add any rider, it’s important to read and understand its exact terms, because each insurance company does things a bit differently. 

Standard term riders

Term Conversion rider

This lets you convert a term life insurance policy to a whole life policy for a specified period, without having to undergo a medical exam.

This can add flexibility by letting you choose permanent coverage later on without having to get a new medical exam. And if your health takes a turn for the worse, conversion may be one of the only viable ways to provide the death benefit you want for your family.

With Guardian Level Term, the cost for this feature is included in the premium, and you can convert to whole life at any time in the first five years. With an optional Extended Conversion Rider, the conversion period can be extended for the length of the term policy – as much as 30 years.

Waiver of Premium rider

If you become disabled and can’t work, this rider can pay your premium, allowing you to keep your policy in force.

Waiver Plus rider

Like the Waiver of Premium, this rider will pay your term policy premium in the event of disability.

As an added benefit, while you are disabled, this rider will also waive your whole life policy premium on conversion, if the conversion occurs at the end of the level term period. 

Guaranteed Renewability rider or clause

Most term policies will let you renew your policy on a year-to-year basis after your term expires – but with much higher premiums. Normally, it would be more economical to get a new term policy, but this can be useful for people who have been diagnosed with a serious or terminal disease near the end of their term and have no other coverage options.

Accelerated Terminal Illness rider

Also called an Accelerated Death Benefit. Often included in the policy premium, this rider can allow those diagnosed with a terminal illness to collect a portion of the death benefit while they are still alive.

Accidental Death rider

This can add an extra benefit to the standard death benefit if death is accidental.

Charitable Benefit rider3

With the Charitable Benefit rider, Guardian will add an extra 1% to your standard death benefit (up to a maximum of $100,000) to be paid to the charity of your choice, over and above the amount paid to your designated beneficiaries, for no additional cost.

Standard Whole life riders

Waiver of Premium rider

If you become disabled and can’t work, this rider will pay your entire whole life premium allowing you to keep your policy in effect.

Accelerated Benefit or Living benefit rider

Similar to an Accelerated Terminal Illness rider, this provides a portion of the death benefit while you are still alive to help pay for medical costs; the difference is that the diagnosed illness or impairment doesn’t have to be terminal – it also covers chronic illness. There is no additional premium charged to add this to a Guardian policy.

Guaranteed Insurability rider

This can allow you to increase the amount of your death benefit at certain times without providing evidence of insurability or undergoing a new medical exam – effectively letting you lock in lower rates now and potentially get an additional policy later if you choose. To illustrate, Guardian gives you up to eight option dates throughout your life to purchase additional coverage.

Accidental Death rider

This adds an extra benefit to the standard death benefit if an accident causes death. Some riders also cover dismemberment, i.e., loss of a limb, with a specified cash benefit paid depending on the nature of the injury.

Specialized whole life (Guardian)

Paid-Up Additions (PUA) rider4

The PUA rider can help increase the accumulation of tax-deferred cash values and death benefit by purchasing paid-up additional insurance to supplement non-guaranteed cash value and death benefit. The greater the premium paid into the rider, the greater the protection.

Index Participation Feature5

This innovative feature can allow Guardian policyholders to allocate between 0% and 100% of their cash value of paid-up additions to receive a dividend adjustment based on the movement of the S&P 500® Price Return Index, subject to a cap and a floor. It can give you a unique opportunity for index-linked upside potential – and the floor helps ensure that your year-to-year downside market exposure is limited.

Renewable Term rider

This rider can result in the purchase of 10-year renewable and convertible level term insurance. It can be a cost-effective way to increase the death benefit for a limited time, for example, while children are still at home.

How to decide what you need

Sometimes a rider can be an obvious choice; for example, a Term Conversion feature that is included in your policy premium. And for others, you may be on the fence – not quite sure if the added features justify the cost. After all, you don’t buy life insurance every day, and insurance contracts – especially those for highly-customized whole life policies – can be difficult for lay people to understand. Specific words and phrases can make a big difference in how each rider works when you need it. For example, every Disability Income rider has a “definition of disability” that says exactly what qualifies as a disability – but that definition can vary widely from one insurer to another – and even between policies from the same insurance company. 

It helps to get guidance from a financial professional who understands the ins and outs of life insurance, takes the time to learn about your unique situation, and can guide you to the solution that best meets your needs. If you don’t know such a professional, ask a friend or colleague for a recommendation. Or, Guardian can connect you to a financial professional who can help. 

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Frequently asked questions about life insurance riders

What is a rider on a life insurance policy?

A rider is an optional provision in a life insurance contract that can provide added benefits or flexibility. Most come at an added cost, but others are included in your policy premium.

Are life insurance riders worth it?

The answer to this question depends on your unique situation and how important a specific rider may be for you. You’ll have to decide if the cost is worth it to you.

Can you add a rider to an existing life insurance policy?

In some cases, yes. For example, a Term Life rider can sometimes be added after the fact to a whole life policy.

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1 Riders may incur an additional cost or premium. Riders may not be available in all states.

2 A Waiver of Premium rider waives the obligation for the policyholder to pay further premiums should he or she become totally disabled continuously for at least six months. This rider will incur an additional cost. See policy contract for additional details and requirements.

3 Subject to state availability. All registered 501(c)(3) organizations are available as your Charitable Benefit Rider recipient.

4 Paid-up Additions (PUA) are purchases of additional insurance (death benefit) that have a cash value. These purchases are made with dividends and/or a rider that allows the policyholder to pay an additional premium over and above the base premium. This creates the growth of death benefit and cash values in a participating whole life policy. Adding large amounts of paid-up additions may create a Modified Endowment Contract (MEC). A MEC is a type of life insurance contract that is subject to last-in-first-out (LIFO) ordinary income tax treatment, similar to distributions from an annuity. The distribution may also be subject to a 10% federal tax penalty on the gain portion of the policy if the owner is under age 59 ½. The death benefit is generally income tax free.

5 The Index Participation Feature (IPF) is a rider available with select Guardian participating whole life policies. With the IPF, policyholders can now allocate between 0% and 100% of the cash value of paid-up additions (PUA) to the IPF each year. The IPF provides an adjustment to the dividend paid under the policy. This adjustment, subject to the cap rate (currently 10.5%) and floor (currently 4%), may be positive or negative based on index performance. Adverse market performance can create negative dividend adjustments which may cause lower overall cash values than would otherwise have accrued had the IPF not been selected. While the adjustment provided by this rider is affected by an external index, it does not participate in any stock or equity investment of the external index. Rider Form Number: 15-IPR, 15-IPR MA.

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