Chapter 13 - Life Insurance Riders Flashcards
Riders (also called endorsements)
Provisions protect the company, riders protect or add more coverage for the insured at a fee.
Aviation exclusion rider: excludes death coverage for pilots, military or student pilots but providers regular death coverage at standard rates.
Aviation Rider : provides coverage for these pilots by charging additional premium.
Automatic Premium Loan Rider (Automatic Policy Loan Rider): if a policy owner does not pay the premium and the grace period expires, the company will automatically make a loan against the cash value to pay the premium. If not repaid the balance will be deducted from the policy’s cash value or death benefit.
Waiver of Premium Rider: very common and waives the premiums if the insured becomes unable to work due to TOTAL disability. The insured must pay for the first 6 months after the disability and after that the life insurance company returns the premiums, and asses the disability. The death benefit stays in place, cash value continues to grow and loan potential stays in place. Once the insured regains the ability to work, premium payments will become active again, with no repayment of premiums during the disability. Insurers will put a age limit on this, say 60. The premium isn’t necessarily waived, the insurer pays to continue to grow the cash value.
Waiver of Premium with Disability Income Rider: same as the Waiver of Premium Rider but adds a stated amount of income replacement benefits for the duration of the disability.
Cost of Living Rider: is linked to some index of the cost of items today compared to yesterday. Consumer Price Index. It’s like an increasing Term policy. The face value and premium do not go down if the consumer prices fall.
Guaranteed Insurability Rider: offers the insured specific increases in the policy’s death benefit at very specific intervals or events such as certain birthdays or when the insured gets married or has a child. Doesn’t require proof insurability. The premium increases at those specific intervals.
Return of Premium Rider: this rider is an increasing term rider. The primary policy provides the main death benefit and the term rider increases each year to cover the rising accumulation of premiums paid.
Return of Cash Value Rider: rather than getting the death benefit or cash value, this rider gets your both.
Additional Insured Term Rider: also called Child or Family Rider. the whole policy is issued to the main family member, the term riders are attached to cover the spouse and children (Spouse Rider, Children’s Rider or Other Insured’s Rider for those outside of the family, business partner, ect). They are convertible terms, meaning temporary, but the insured may choose to convert the term coverage to permanent if they choose to. Does not increase as more children are added.
Payor Benefit Rider: also called applicant waiver provision. Pays the premium on a child’s policy if the policy owner becomes disabled or dies. At agent 18 the premiums would need to be paid by the child. In most cases these are limited pay whole life policies and are paid up by the time the child reaches adulthood.
Accelerated Death Benefit Rider. Also called the Living Benefit Rider: grants the insured access to part of the policies death benefit while still alive if the insured shows terminal illness, contract specific diseases, or requires nursing home care. Usually paid at a 50% of face value and deducted from the death benefit.
