The Hidden Value of Riders: How Critical Illness, Long-Term Care, and Other Add-ons Can Impact Your Policy

The “Fine Print” That Can Transform Your Policy

As nice as it would be, life insurance doesn’t cover everything in life. But riders allow it to cover far more than a standard policy. Everyone should consider life insurance riders so they don’t miss out on invaluable benefits that protect them and their loved ones against disabilities, long-term care expenses, chronic illnesses, and more.

In this guide, we will go over the most common life insurance riders, how to use their benefits, and the best ways to increase the value of your policy.

What Are Life Insurance Riders?

Life insurance riders are optional add-ons that can greatly enhance or tweak your coverage. Customizing your life insurance plan lets you achieve your financial goals and mitigate personal risks.

A life insurance rider can:

• Make your policy more flexible
• Add coverage other than the death benefit (e.g. disability support or waiver of premiums)
• Vary in cost depending on your age, insurer, and other factors

How Riders Help Manage Exclusions or Special Limitations

There are gaps in life insurance that mean in some situations, the policy would not protect you or your loved ones. Riders are the way to obtain coverage for special situations and exclusions. Plus, you can gain extra benefits to help yourself and your family in case you become ill, disabled, or require long-term care. The living benefits can improve the quality of life for all of your family.

If a medical emergency happens but it is not lethal, then default life insurance may not provide any assistance. If you don’t want to keep paying the premium for no current benefits when ill or disabled, then a rider can offer helpful value. Riders provide financial breathing room during different forms of crises, addressing risks that traditional life insurance doesn’t usually cover.

Critical Illness Rider

A critical illness rider usually covers:

• Cancer
• Heart attacks
• Stroke
• Organ failure
• Other major medical diagnoses

How does a critical illness rider work?

If you receive a major diagnosis, a critical illness rider allows the life insurance policy to pay a lump sum to you. This money can be used for a wide range of needs, such as treatment, daily bills, and even travel.

Who benefits from a critical illness rider

• Families with high medical costs or risks
• People who lack good health or disability insurance coverage
• People who work physically demanding jobs that have high rates of health impact

Long-Term Care Rider

A long-term care rider can provide coverage in case you end up needing:

• Assisted living
• Nursing home care
• In-home medical support

How does a long-term care rider work?

The rider lets you accelerate the death benefit to pay for long-term care. This helps offset significant, rising long-term care (LTC) costs.

Who needs an LTC rider

• Older adults planning for retirement
• Anyone with family history of degenerative health risks

Chronic Illness Rider

A chronic illness rider can provide financial relief if you get a condition that permanently reduces your ability to earn income or perform daily activities. Life insurance companies may use the ADL definition to see how Activities of Daily Living are impacted, such as bathing, dressing, ambulating (walking), and eating.

Long-term disabilities or severe illnesses can gravely hurt your quality of life and income stream, so a chronic illness rider allows you to gain life insurance funds even while alive.

For example:

• The life insurance chronic illness rider is triggered if you cannot perform 2 out of 6 ADLs
• You tell your insurer, receiving funds earlier than the death benefit
• You use the funds for daily living expenses and long-term care

Who needs a chronic illness rider

You may want a chronic illness rider if:

• You are worried about chronic health decline
• You lack standalone LTC coverage
• You work a high-risk job

Terminal Illness Rider

The terminal illness rider is typically included (for free) in life insurance policies.

What it covers

If you ever end up diagnosed with a condition and have a limited life expectancy, such as 6 to 24 months, then you would be able to access a part of the death benefit earlier.

Best for

A terminal illness rider is usually automatically included and covers all policyholders.

If your life insurance policy does not have terminal illness coverage, there should be a reason for it (e.g. the premium is very low). Consider adding the rider or switching insurers if you want the peace of mind of a terminal illness rider.

Waiver of Premium Rider

Imagine a situation in which you become disabled and no longer have a steady income source… but you still have to pay life insurance premiums. If that seems like an awful situation you want to be protected against, then consider a waiver of premium rider.

Waiver of premium benefits

If you become disabled or critically ill, according to the terms, the rider will waive premiums. That means you wouldn’t need to pay the premiums, but you would still keep the life insurance policy in force (AKA maintain active coverage).

Best for

A waiver of premium rider is typically best for younger professionals who do not have significant savings.

People with physically demanding jobs should also consider a waiver of premium rider. They would lose out on a lot of income if they became disabled and would likely have difficulties gaining new income. Workers’ compensation insurance from the employer is helpful, but may not be enough. Anyone concerned about disability-related income loss can benefit from a waiver of premium rider.

Accidental Death Benefit (ADB) Rider

An accidental death benefit rider provides an extra payout if the death is caused by an eligible accident. You may want to purchase this rider if:

• You have a high-risk job
• You travel frequently

Are you an outdoors enthusiast or adventurer? Be sure to review your policy exclusions to see how high-risk activities may impact your life insurance policy.

Child Term Rider

A child term rider provides life insurance for your children, and can be converted to a permanent policy later.

When you might need a child term rider

Parents who want future life insurance coverage for their kids can consider child term riders. These riders make insurance costs more affordable later on. However, child term riders could raise the premium unnecessarily. Choose a policy that makes sense for your family and your financial situation.

Return of Premium (ROP) Rider

Return of premium riders will give you back the money that you have paid in premiums if you survive the policy term. This is only for certain term life insurance policies. ROP life insurance policies tends to be cheaper if you are younger and healthier.

What is the point of a ROP rider?

A ROP rider essentially refunds all or most of your premiums if you outlive your term policy. Essentially, you are paying a little more through premiums in order to receive a payout if you don’t die.

Who benefits from an ROP rider

• Budget-conscious buyers who want guaranteed value
• Someone who wants the insurance policy to act as a financial “investment”

Guaranteed Insurability Rider

A guaranteed insurability rider lets you guarantee coverage without medical exams in the future (with the same insurer). It is best for young adults who are anticipating more financial responsibility or medical concerns in the future.

Essentially, people with a family history of health issues or genetic concerns may want to obtain a guaranteed insurability rider while it is affordable and possible. You have to qualify for the guaranteed insurability rider, such as by being under the designated age limit (40 years or less).

When Riders Are Worth the Cost

Riders make more sense if you have dependents who rely on your income, or you have minimal savings and require extra financial assistance if you were to become disabled or critically ill.

Riders do not usually raise your life insurance premium by much. They add extra flexibility in case something happens. You and the life insurance company are both speculating on how much risk there is and whether the rider is worth the cost.

People with family histories of illnesses tend to benefit the most from guaranteed insurability and illness-related riders. They have greater health risks that could impact income, long-term care needs, and more.

So who should consider riders?

If you have:

• Dependents who rely on your income
• A family history of illness or disability
• Risky jobs or frequent travel requirements
• A desire for guaranteed living benefits, not just a death payout
• No good long-term care or disability insurance
• A need for more flexibility in your policy

Then consider life insurance riders.

When Riders May Not Be Necessary

You might skip riders if:

• You have strong health, disability, and long-term care insurance through your employer
• You need only basic coverage for deaths
• The budget constraints outweigh additional benefits

Cost Considerations

You don’t want a life insurance policy (plus riders) that makes it hard to budget every month. Life insurance policies last a long time, especially if you have permanent life insurance. Carefully consider your budget when choosing riders, since they can be cheap, adding 1% to your premium, or adding 20% which makes a big difference.

Long-term care riders tend to be the most expensive.

Life insurance rider premiums vary by age, health, and insurance company. The base life insurance premium is also important to consider.

How Riders Affect Policy Performance

Riders may reduce the death benefit if you end up using them.

Do you have a cash value policy, like a universal life insurance policy? The policy may accumulate value more slowly depending on the rider.

Riders can significantly increase policy usefulness, but similar to life insurance, it is not definite that you would be using its value.

Important Fine Print to Understand

Waiting periods: There is usually a period of time before the rider or policy becomes active.

Eligibility triggers: There are diagnosis thresholds and ADL checks to see whether what you are experiencing falls under the protection of each rider.

Impact on death benefit payout: Some riders reduce the death benefit if you need to access their value while alive.

Rider fees (flat vs. percentage-based): Read the cost of the rider carefully.

Changes over time: Not every rider locks in forever. Read the terms of the rider thoroughly.

What Riders for Each Life Stage

For Young Adults (20s–30s)

Young adults who buy life insurance can skip medical exams and lock in cheap life insurance premiums. There are many riders that can help young adults.

Waiver of premium: Lets you cancel life insurance premiums if you become disabled or critically ill.

Guaranteed insurability: The guaranteed insurability rider lets you acquire insurance going forward from the same insurer without undergoing extra exams in the future. This has an age limit, only accessible to young adults (usually under 40 years old).

Child rider: Families may want a child rider that slightly increases premium but adds a death benefit that pays out if the child passes away.

Accidental death benefit: Gain greater lump sum of a death benefit if the policyholder passes away from an accidental death.

For Families (30s–50s)

Older families will start wanting to care about how illnesses, both acute and chronic, may impact their lives.

• Critical illness
• Chronic illness
• Child riders
• Return of premium for term life policies

For Pre-Retirees & Retirees

People who are about to retire may not qualify for guaranteed insurability and other riders. This is when life insurance starts costing a lot more. Riders to consider include:

• Long-term care rider
• Chronic illness
• Terminal illness (which is usually included by defualt)

Customize Your Life Insurance Policy Today

Life insurance doesn’t only have to cover your death–it can make your life easier and help you avoid potential financial challenges. Popular riders include:

• Guaranteed insurability
• Return of premiums (ROP)
• Critical and chronic illness riders
• Accidental death benefits

Investing in a rider now means you could get more value and protection out of your life insurance policy. Check out the best life insurance to see what aligns with your risks, goals, and life stage today.