Riders

terminal illness option

90-95% of the death benefit may be used to offset medical expenses.

All of the following are qualifying conditions that would trigger payment of benefits under an accelerated benefits provision:

A medical condition that would drastically limit a life span as specified in the policy, for instance, to 24 months or less. A medical condition that requires extraordinary medical intervention, without which the insured would die. A condition that usually requires continuous confinement in an eligible institution as specified in the policy if the insured is expected to live there for the rest of the insured's life. A medical condition that would, in the absence of extensive or extraordinary medical treatment, drastically limit a life span, including coronary artery disease resulting in an acute infarction or requiring surgery, permanent neurological deficit resulting from cerebral vascular accident, end stage renal failure, and AIDS

Additional Insureds

Coverage for a spouse may be obtained to cover the extra expenses of child care and home-related costs by purchasing some sort of family term insurance. This insurance may also be used to protect dependent parents. A term policy can be added to policy to provide this coverage. Spouse/other-insured term riders are used to purchase insurance on a spouse or someone other than the original person. Examples include: a child term rider—used to purchase term insurance on a life of a child; and a family term rider—combines the spouse and the children's rider for temporary coverage on the family.

Guaranteed Insurability, guaranteed-insurability option (GIO), guaranteed-insurability benefit (GIB)

Many insurance companies now offer ____________, which allows a policyholder to purchase specified amounts of additional insurance without evidence of insurability. The new insurance is issued at standard rates on the basis of the insured's attained age when the option is exercised. In most cases, this benefit allows an insured to purchase additional insurance coverage at three-year intervals beginning with the policy anniversary nearest the insured's 25th birthday and terminating with the anniversary nearest the insured's 40th birthday. The amount of additional insurance that may be purchased on each of the specified dates is equal to the face of the original policy or $10,000, whichever is less. Some insurers provide additional option dates at other important periods in the insured's life, such as marriage or the birth of a child.

Cost of Living (COL), cost of living adjustment (COLA)

Some companies offer their applicants the ability to guard against the eroding effects of inflation. This rider can provide increases in the amount of insurance protection without requiring the insured to provide evidence of insurability. The amount of increase is tied to an increase in an inflation index, most commonly the Consumer Price Index (CPI). Depending on the type of base policy, these riders can take several forms. The purpose of this rider is to increase the death benefit to keep pace with inflation, tied to the CPI. No proof of insurability is required. Premium is based on attained age.

Substitute Insured Rider, exchange privilege rider

The ability of this rider is desirable, for instance, in business-owned life insurance, when a key employee or business executive is insured for the benefit of the corporation. If this employee terminates employment or retires, the insurance can be switched over to apply to the employee's replacement, subject to evidence of insurability. This way, the policy can continue (rather than be terminated and a new policy issued) with the same face amount, and premiums can be calculated on the basis of the new insured's age, sex, and other factors.

There are two approaches to the LTC rider concept

The generalized or independent approach recognizes the LTC rider as independent from the life policy because the benefits paid to the insured will not affect the life policy's face amount or cash value. The integrated approach links the LTC benefits paid to the life policy's face amount and/or cash value.

Return of Cash Value

The return of cash value rider is similar to the return of premium rider in that it is merely an additional amount of term insurance that is equal to the cash value at any point while effective. Buying it, the policyowner is simply getting additional term insurance. In reality, this rider does not return the cash value; it pays an additional amount of insurance equal to the cash value.

LTC rider benefits are similar to those found in a LTC policy. The benefit structure includes the following.

There are elimination periods of 10-100 days. Benefit periods are three to five years or longer. Prior hospitalization for at least three days may be required. Benefits may be triggered by impaired activities of daily living. Levels of care include skilled, intermediate, custodial, and home health care.

Accelerated Benefits

These riders or provisions are standard in most individual and group life insurance policies. Through these provisions, people who are terminally or chronically ill have tax-free access to policy death benefits. People suffering from AIDS, cancer, heart disease, Alzheimer's disease, or other terminal or severe chronic illnesses often experience devastating financial hardship. These funds are usually used for such necessities as rent, food, and medical services.

Accidental death and dismemberment insurance (AD&D)

This also provides benefits for death due to an accident, or for the loss of one or more hands, feet, arms, legs, or loss of sight. The principal sum would be paid for death or loss of two or more of the primary parts; the capital sum is paid for loss of one of the primary parts.

Waiver of Premium

This rider found in a life insurance contract states that if an insured becomes permanently and totally disabled during the term of the policy, premium payments will be waived during the period of disability. The contract will remain in force just as if the premiums were paid. An additional premium is charged for this benefit, and it is subject to a waiting period (typically, three to six months). If the insured is still totally disabled after this period, premiums are waived retroactively from the date of disability. (Usually the insured and the policyowner are the same.) Some life insurance contracts stipulate that disability must occur prior to a specified age, such as age 60 or 65.The additional premium paid for this benefit does not increase the face amount of the policy nor the policy's cash value.

Payor Rider (payor clause)

This rider or provision may be added to a life insurance contract which provides for the continuance of insurance coverage on the life of a juvenile in the event of the death or total disability of the individual responsible for the payment of the premiums (a parent or guardian). This benefit may be added for an additional premium. This benefit provides that premiums will be waived until the insured attains a specified age or the maturity date of the contract, whichever is earlier, in the event that the payor dies or becomes totally disabled.

Disability Income Rider

This rider waives premium payments while the policyowner is totally disabled and pays a specified amount each month (income) to the policyowner while the disability continues. Under this rider, the company guarantees the insured policyowner a regular monthly income for as long as the insured remains totally and permanently disabled. The amount of the income is usually based on the face amount of the policy—for instance, $X per month per $1,000 of coverage. An income under this rider continues for the length of the disability. However, a waiting period is required by most companies to ensure that the disability is, in fact, permanent (by the company's definition) and total (as determined by a company-approved physician).

Return of Premium

This rider was developed primarily as a sales tool to enable the agent to say, for example, "In addition to the face amount payable at your death, we will return all premiums paid if you die within the first 20 years." The rider is simply an increasing amount of term insurance that always equals the total of premiums paid at any point during the effective years. In reality, the rider does not return premium but pays an additional amount at death that equals the premiums paid up to that time, as long as death falls within the time specified in the rider. By purchasing this rider, the policyowner is buying term insurance and is charged for it accordingly.

Waiver of Cost of Insurance (Universal Life Policies)

This rider, also found in universal life insurance policies, will pay the minimum amount of premium to keep the policy in force if the insured becomes permanently and totally disabled. When the average premium payment is calculated, there would be enough premiums to not only cover the cost of insurance, but also to contribute, in part, towards cash value accumulation.

Effect on Death Benefit

Whatever amount is withdrawn will be deducted from the face amount when death occurs. Accelerated death benefits are received income tax-free as long as the insured is terminally ill. This provision is given without an increase in premium.

Accelerated death benefit Disclosures

When a policy or certificate containing an accelerated benefit provision is applied for or delivered, the producer is responsible for providing the applicant a summary of coverage that includes: a brief summary of the accelerated benefit and definitions of the conditions or occurrences triggering payment of the benefit; and an explanation of any effect of the payment of an accelerated benefit on the cash value, accumulation account, death benefit, premium payments, and any loans or liens. When an accelerated benefit option is exercised, the insurer must provide to the policyholder or certificate holder and any irrevocable beneficiary an illustration that: numerically demonstrates any effect the payment of the benefit will have on the cash value, accumulation account, death benefit, premium payments, and any loans or liens; and includes a statement that receipt of accelerated benefit payments may adversely affect the recipient's eligibility for Medicaid or other government benefits or entitlements, that benefits may be taxable, and that assistance should be sought from a personal tax advisor.

waiver

a type of rider that is used to exclude benefits and for which no premium is charged. For example, a waiver may be attached to a policy that excludes benefits for death by a specified cause such as a particularly hazardous hobby.

certain optional benefits also may be provided such as

adult day care, cost-of-living protection, hospice care, and others.

The living benefit or living needs rider

combines life insurance and LTC benefits, drawing on the life insurance benefits to generate LTC benefits. In a sense, it's like borrowing from the life insurance to pay LTC benefits.

Accidental death benefit (ADB) will not be made by an insurer if death results from certain causes, including:

illegal activities; war; aviation activities (except passenger travel on scheduled or commercial airlines); or where an accident was involved in conjunction with illness, disease, or mental infirmity.

Long-term care (LTC) insurance, living benefits provision

reimburses health and social service expenses incurred in a convalescent or nursing home facility, can be marketed as a rider to life insurance policies.

Riders

special policy provisions that attach to the policy, or "ride" it. also can refer to a term policy that is attached to a permanent policy to provide additional coverage. can be used to enhance or add benefits to the policy, or they can be used to take benefits away from the policy. Ones that add benefits generally require the payment of additional premium.

Accidental Death (Double Indemnity), Accidental death benefit

this rider may be added to a life insurance policy. This benefit is sometimes referred to as ___________ ____________ because it provides double the face amount of the policy if the insured dies due to an accident. An additional premium will be charged for this benefit. To be covered, death must occur within 90 days of an accident. The basic purpose of this restriction is to make sure that the accident is the only cause of death. coverage is usually limited to age 60, 65, or, in few cases, age 70. the multiple indemnity rider excludes death resulting from suicide

LTC option

up to 70-80% of the policy's death benefit may be used to offset nursing home expenses.