Financial Literacy Part 8--Utilizing Life Insurance Riders (part 1)

Like any complex financial product, life insurance isn't really a point-and-click type of purchase. In order to maximize your premium dollars and create a policy with real value for you and your family, you must consider the purchase of life insurance riders.

A rider is basically an additional benefit you can tack on to your policy. It's kind of like buying a model home with upgraded counter tops. The rider costs a little bit of extra money but provides an additional benefit and they are generally extremely cost-effective.

Over the next few weeks we will discuss some of the riders you can get on your life insurance policy. Please note that riders can vary and you need to speak to your insurance company about their riders before you make any decisions.

Family Riders

Child Rider: A child rider is additional coverage that pays out in the event of the death of one or more of your children. Most child riders provide $5,000-$10,000 worth of coverage for each of your children for one low monthly premium. The rider is generally considered a term rider and covers the child(ren) until they are 18 or, in some cases, in their early 20’s.

Spouse Rider: A spouse rider is coverage that provides a benefit if your spouse pre-deceases you. In most cases, if you and your spouse are involved in a joint accident the benefit on the spouse rider will only be paid out if the spouse dies before the main policyholder. Spouse riders are usually sold in death benefit increments of $10,000 and the total benefit purchased may have a cap that is much lower than the death benefit of the underlying life insurance policy. They can be purchased for spouses of any age (18 or older) and. In some cases, may not require medical underwriting. The coverage is considered term and ceases when the underlying term life insurance policy matures or when the main policyholder dies.