Riders Worth Paying For: Which Life Insurance Add-Ons Make Sense?

Life insurance policies, both whole life and term life, provide a death benefit when the policyholder passes away. Insurance riders can drastically improve the scope of coverage. However, with so many add-ons you can choose from, it is hard to know which are worth the extra cost.

In this guide, we will break down the best life insurance riders, their pros and cons, and how to get the most value from them.

What Are Life Insurance Riders?

A life insurance rider is an optional add-on to your policy that can customize your coverage for specific needs. Life insurance policies with riders offer flexibility and tailored protection. The caveat is that each rider will increase your life insurance premium cost, so it is important to prioritize the most useful riders.

Accelerated Death Benefit Rider

The accelerated death benefit rider lets you access a portion of your death benefit earlier if you are diagnosed with a terminal illness. This allows you to use the money for medical expenses, hospice care, or final arrangements.

The financial assistance of tapping into your death benefit early can go a long way in relieving your pain in case you receive a grave diagnosis. It can also help alleviate the financial impact on your loved ones since they won’t have to wonder how they can help pay for your treatment and care in case you are diagnosed with a critical condition. Health insurance may pay for treatment, but it does not help with caretakers, funeral planning, and other expenses.

Pros: Provides financial relief for medical expenses or arrangements, giving you more control over your final moments.

Cons: The accelerated death benefit rider lets you tap into the death benefit, so it reduces the final death benefit to beneficiaries.

Families who want liquidity during a critical illness or medical condition can benefit greatly from the accelerated death benefit rider.

Waiver of Premium Rider

The waiver of premium rider works by waiving your life insurance premiums if you become disabled and can no longer work. This waiver can be helpful because premiums are a continuous cost every month, half-year, or year. They can be too expensive if you abruptly lose your source of income due to a serious illness or disability.

The waiver of premium helps ensure there is no lapse in coverage because of a disability. Even if you can’t afford the life insurance premiums after getting disabled, your life insurance coverage will continue and loved ones will still be able to receive a death benefit after you pass away.

Disability doesn’t mean death, but it does mean limiting your income. Let’s say a young man in his thirties breaks his spine and can no longer work normally. He needs to rely on his wife and disability checks for income. This makes the life insurance premium a troubling recurring payment when the family also needs to worry about childcare, mortgage, and grocery expenses.

With a waiver of premium rider, the family is able to avoid paying for his life insurance every month while still maintaining coverage. After a few decades, when he passes away, his wife and children receive the death benefit.

Pros: The waiver of premium keeps policy active without financial strain so you can focus on your health.

Cons: A waiver of premium rider can increase the monthly cost of your life insurance. Depending on the insurer, there may also be strict definitions of “disability.”

Waiver of premium riders are best for younger workers with long earning years ahead.

Long-Term Care (LTC) Rider

The long-term care rider lets you access the death benefit to pay for nursing home, assisted living, or home care costs. It is similar to an accelerated death benefit rider, but has more specific purposes.

Long-term care is important for those who are struggling with physical or mental health conditions. The expenses have been increasing from year to year, making long-term care too expensive for many people. In Washington D.C., long-term costs increased ~10% between 2023 and 2024. A private nursing home can cost over $120,000 a year. Having an LTC rider helps you afford long-term care so you and your loved ones don’t have to worry over it.

Pros: An LTC rider can help you manage skyrocketing long-term care expenses in case you need them.

Cons: An LTC rider can increase your life insurance premium. It may make more financial sense to focus on investments with the extra cost instead, depending on your situation and budget.

Long-term care life insurance riders are generally best for middle-aged to older policyholders who are planning for potential healthcare needs.

Child Term Rider

A child term rider provides term coverage for children until adulthood. It is added to the parent’s policy. Child term riders can be a meaningful way to support your family because it ensures you can fully focus on treating any medical illnesses or injuries and investing in your child’s future.

Many child term riders are available for biological or adopted children, and may also be extended to grandchildren if you are the legal guardian.

Plus, a child term rider can be versatile because many insurers let you convert it to permanent coverage for your child once they grow up.

Pros: Low cost makes them cheaper than a new policy for the child. A child term rider can usually be converted to permanent coverage later.

Cons: Limited coverage amounts.

Child term riders are best for parents seeking affordable life insurance coverage for children. This may be needed if the family struggles with health or family finances.

Guaranteed Insurability Rider

The guaranteed insurability rider is an extra price you pay to purchase additional life insurance coverage at set times without new medical exams. This rider is generally purchased by those who know their family has genetically passed down diseases or health conditions.

For example, some families are more prone to cardiovascular diseases because of genetics. Because of this knowledge, you might expect to face heart health challenges in the future that will greatly raise your term life insurance premium. By purchasing the guaranteed insurability rider, you can ensure you can buy or renew life insurance easily without medical exams.

Pros: Locks in insurability regardless of significant life changes, such as health problems or career changes.

Cons: Higher upfront cost. There may also be an end date, terminating the guaranteed insurability rider once you reach a certain age.

Guaranteed insurability riders are best for young adults or those who have a family history of health conditions.

Return of Premium Rider

The return of premium (ROP) rider refunds premiums if the life insurance policyholder outlives a term policy. Essentially, this means your premiums will not be “wasted” if you don’t die. Return of premium riders are expensive and can return either all or some of the premiums. You can usually add this type of rider before or after buying insurance, though adding it afterwards may require additional underwriting.

Let’s give an example of how a return of premium would look. Let’s say you buy a 20 year term life insurance policy with a $70 premium. Your ROP rider dictates that the monthly payment amount eligible for ROP is $50. For life insurance, you would be paying ($70/month x 12 months x 20) = $16,800. If you survive the entire 20 years, your ROP rider means you will receive ($50/month x 12 months x 20) = $12,000 back. You only end up paying $4,800 for twenty years of life insurance.

However, not all ROP riders are worth it. They do increase your term life insurance premium. This added amount might have been better used on other things during the policy term.

How it works: Refunds premiums if policyholder outlives a term policy.

Pros: Offers refund on life insurance premiums if the policyholder does not pass away during the term.

Cons: Makes your term life insurance more expensive. Generally lower ROI when compared to investing elsewhere.

Return of premium riders are best for conservative savers who don’t want to “waste” money on life insurance if their beneficiaries don’t end up getting the payout.

Other Specialized Riders

Many other niche, specialized riders exist. You can ask your insurance company to see a full list of riders they offer. Here are some of the most popular ones.

Accidental Death Benefit Rider

If the policyholder dies as a result of an accident, the accidental death benefit rider means beneficiaries receive an additional death benefit.

Spousal Insurance Rider

A spouse rider adds a death benefit if the policyholder’s spouse passes away. A spouse rider could be a more affordable way to add life insurance to your spouse than buying a separate policy for them. However, spouse riders are often more expensive than child insurance riders.

Critical Illness Rider

A critical illness rider lets you access the death benefit early if you are diagnosed with a critical condition or illness. This typically means illnesses like stroke, paralysis, major organ transplant, and cancer. The rider can be useful since it lets you pay for medical expenses and long-term care.

Chronic Illness Rider

A chronic illness rider lets you access the death benefit early if you get diagnosed with a chronic illness. You are typically only allowed to access a certain percentage of the death benefit, such as 20%. The chronic illness benefit can be useful for paying for long-term care and pain management.

How to Decide Which Riders Are Worth It

Assess personal risk factors

Many factors impact whether a life insurance rider is worth it. Factors to consider include:

• Health
• Family history
• Career risks
• Budget

Balance cost vs. benefit

Riders can increase your life insurance premium either slightly or significantly. Compare policy premiums with and without riders to get an idea of how much extra you would be paying over the term (or entirety) of the life insurance policy. Rider ROIs vary depending on your situation and policy details. Pick riders that have a reasonable cost. Otherwise, the money might be better used in investments or other purposes.

Consider long-term needs

Estate planning, healthcare, income protection… these are all things to consider as we grow old. Consider which riders would have a worthwhile long-term benefit to you and/or your dependents.

Review periodically

As your family and financial situations change, you might benefit from new riders or want to remove an active rider. Contacting your life insurance agent will let you see how to add or remove riders from your policy. Modifying your life insurance may require additional time and underwriting.

It is a good idea to review your life insurance plans periodically so you know your options and are staying protected.

Conclusion

Life insurance riders add extra coverage that can be very valuable, but they’re not one-size-fits-all. Many of these riders, like the long-term care or return of premium riders, are specialized for certain risks.

Ideally, you should focus on riders that align with your lifestyle, financial goals, and risk exposure. Review the best life insurance policies with an advisor today to identify which riders make the most sense for you.