Financial Literacy Part 10--Utilizing Life Insurance Riders (part 3)

Now we’ve come to the benefit riders. These are riders that add additional benefits to your life insurance policy.

Benefit Riders

Accelerated Death Benefit Rider: The accelerated death benefit rider is a rider that pays out a portion of your death benefit before you pass away. Obviously, this rider has some very important caveats or life insurance companies would be advancing payments every five minutes.

The accelerated death benefit rider only pays out death benefits to a living insured if he or she has been diagnosed with a terminal illness. Because a person who is terminally ill requires long-term care either at home or in a nursing home and is unable to work, insurers offer this benefit to help reduce some of the financial burden caused by a lost income and expensive medical care.

When using this rider, it is important to understand that you are using the actual death benefit. Only that portion of the death benefit which is not advanced to you will be paid out upon death.

Accidental Death Benefit: When families have time to prepare for the loss of a loved one, they may be able to become financial prepared for the loss. But when a spouse or family member dies as the result of an unexpected accident, the sudden loss of income and possible accrual of new bills can create a tremendous financial burden. An accidental death benefit rider gives the beneficiaries of a life insurance policy an additional death benefit if the death of the insured was the result of an accident. In most instances, this additional amount actually doubles the policy death benefit.

Some life insurance companies actually include a dismemberment clause into the accidental death rider allowing for an advance of death benefits if the insured should become dismembered in an accident. Not every life insurance company offers dismemberment as part of its accidental death rider, so be sure to read the fine print.