Life Insurance Riders Flashcards
Benefit options to tailor a policy to the owner’s needs
Life insurance riders
Waiver of premium rider
-one of the most common
-will pay the premiums if a policyholder becomes disabled so policyholder can continue to have coverage for the duration of the policy
With the waiver of premium rider, the insured must be unable to work for a certain period, called the _____ ______, before the waiver takes effect. Usually 90-180 days.
Waiting period
The waiver of premium rider is available during…
….the insured’s working years and expires between ages of 60 and 65, unless insured becomes permanently disabled before that age.
Waiver of monthly deductions/waiver of cost of insurance
-disability premium waiver for flexible premium policies
-suspends the monthly cost of insurance deductions made from the cash account instead of waiving the premium payment
Waiver of premium summary
-insured and owner are the same person
-waives premiums as long as the insured is disabled
-insured pays premium during the waiting period
-company pays premiums after waiting period
-premiums paid during waiting period reimbursed
-insured pays premiums when disability ends
Waiver of cost of insurance (universal life) summary
-cash account deductions waived
-waiting period and standard expiration
Disability income rider
-provides the insured with a monthly benefit check if they become disabled
-the benefit amount is typically based on the life insurance policy death benefit and an industry standard is 1% of the face value
Payor benefit rider
-usually found with juvenile policies
-pays premiums if adult payor dies or is disabled
-requires evidence of insurability
Disability riders
-waiver of premium
-waiver of cost of insurance (universal life)
-disability income rider
-payor rider
Standard coverage added to a life insurance policy that enables the policy owner to apply for an advance on the death benefit proceeds during the lifetime of the insured. Insured must have a limited life expectancy or meet certain medical circumstances.
Accelerated death benefit rider
Accelerated death benefit payment range from ____ to ____ % of the death benefit
25-100%
The payment of an accelerated death benefit depends on:
The policy’s face value, the terms of the contract, and the state of residence
Accelerated death benefit qualifying events
-terminal illness with death expected within 24 months
-serious illness which results in a reduced life expectancy
-long-term care to due inability to perform a number of ADLs
-being admitted to hospice or permanent confinement in a nursing home
-catastrophic illness requiring extraordinary treatment such as organ transplant
Spouse rider
Provides convertible term insurance for a spouse or an immediate family member of the primary insured
Family rider
Covers both the insured’s sudse and children to provide convertible term insurance
Exchanged privilege (substitute insured) riders
Used to change the insured to a different person
-typically used when a business owns the policy and is also the beneficiary and the insured is a key employee
-switches insured to another employee if the key employee retires or leaves the company
Other insured riders
-spouse
-children
-family
-exchange of insured
The insured can add term insurance to a permanent insurance policy using
The term insurance rider
Term insurance rider provides
Coverage similar to a term insurance policy however the premium is lower than purchasing a separate policy
There are three term insurance riders available:
- Level
- Decreasing
- Increasing
Insured Term Rider
-added to a permanent policy
-premium lower than a separate policy
-limited time for rider
-expires at a certain age or number of years
Return of Premium Rider
-increasing term insurance rider
-amount of rider equivalent to all premiums paid
-death must occur while rider is in force
The return of premium is an _________ term rider
Increasing; the death benefit always equals the total of premiums paid for the rider and the underlying permanent policy
Accidental death benefit rider
-death due to accident
-death must occur within 90 days of accident
-doubles or triples the face amount
Pays an extra benefit if the insured dies as the result of an accident. Sometimes referred to as double or triple indemnity because the death benefit is 2-3 times the face amount of the policy
The accidental death benefit (ADB) rider
For the accidental death benefit rider benefit rider to be payable, the insured must…
..die within 90 days of an accident
The accidental death benefit (ADB) rider does not cover other causes of death like:
-illness
-disability
-self-inflicted injury
The accidental death benefit rider usually expires when the insured
Reached age 60 or 65
Accidental Death or Dismemberment Rider
-the principal sum 100% of death benefit
—paid if death due to accident
—within 90 days of accident date
-pays benefit if dismemberment occurs
—severance of feet, arms, legs or hands
—loss of sight or hearing
—paralysis
-dismemberment is the capital sum- 50% of the principal sum
-for multiple dismemberment claims max paid is principal sum
The principal sum of an accidental death and dismemberment rider is the amount of
The rider and 100% of the death benefit is paid upon accidental death of the insured
The capital sum of the accidental death and dismemberment rider is
50% or 1/2 of the principal sum
Dismemberment includes:
-severance of legs, arms, feet, or hands
-loss of sight
-loss of hearing
-paralysis
Guaranteed insurability rider (GIR)
Add life insurance up to a specified amount
-certain ages: between 25 and 40
-life events- marriage, birth, or adoption of a child
-no medical questions asked
-cost based on the insured’s attained age
May be attached to a permanent life insurance policy and allows the owner to purchase additional life insurance at specified intervals in the future for certain amounts without having to provide evidence of insurability
Guaranteed insurability rider
Options to purchase a additional life insurance with a guaranteed insurability rider may be exercised typically between..
…ages 25 and 40 at 3-year intervals
Cost of living rider
-based on the consumer price index (CPI)
-extra coverage to keep up with inflation
-premium based on attained age
-without proof of insurability
Riders affecting amount of death benefit
-insured term rider
-return of premium rider
-accidental death rider
-accidental death or dismemberment rider
-guaranteed insurability rider
-cost of living rider
Long-Term Care rider (LTC)
-advance of the death benefits while insured is living
-percentage of face amount each month
-may pay for home care, assisted living, and nursing home care
-reduces death benefit payable upon death
There are two approaches to the long-term care (LTC) rider concept
-independent approach
-integrated approach
Independent approach LTC rider concept
Recognized the LTC benefit 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
Integrated approach LTC rider concept
Links the LTC benefits paid to the life policy’s face amount and/or cash value
