• Thu. May 23rd, 2024

4 Life Insurance Riders a Financial Planner Says You Should Consider

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  • I always stress the importance of life insurance to clients — but you should look at your policy closely.
  • Riders can help if you get a terminal illness, have a major life change, or need long-term care.
  • While other forms of insurance may offer similar benefits, a life insurance rider may be more affordable.

No one wants to think about dying, but preparing for the future is a critical way to ensure your family and loved ones are financially covered.

As a financial planner, I always stress the importance of getting life insurance. It can help pay off any debts, medical bills, or expenses someone may have after they die. This protects their loved ones from potentially significant financial loss.

Most life insurance policies are pretty straightforward — pay a set premium annually, and your beneficiaries will receive the death benefits immediately.

But you can also include add-ons or riders in your life insurance policy to get added support and bridge specific coverage gaps. Some riders are automatically added and don’t cost anything extra, while others may increase your premiums in exchange for extra benefits.

If you already have life insurance or are considering getting it, consider adding these lesser-known riders to your policy. Most of these riders are reasonably low-cost but can greatly benefit your loved ones.

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1. Accelerated death benefit rider

This rider allows you to access some of your policy’s death benefit if you’re diagnosed with a terminal illness. This rider often comes with no extra premium or a small extra premium.

This can help you and your family afford costly medical bills and stay out of debt while you’re still alive. You’ll need an official doctor’s diagnosis to qualify for the rider.

You can use the money for long-term care, to seek alternative treatments, or simply enjoy your remaining time with your loved ones. Keep in mind that this rider will reduce the total death benefit your family will receive.

2. Long-term care rider

Healthcare is one of the most considerable costs in retirement, and costs have been steadily rising. This includes the cost of long-term care, including for senior living homes or at-home care.

Many people vastly underestimate the cost of long-term care, which makes having a long-term care rider all the more important. This rider allows you to withdraw some of your death benefits to pay for qualifying long-term care expenses.

This rider gives you flexibility, helping protect your assets and loved ones from the high cost of long-term care and preserving your control over your financial decisions.

While this is one of the more expensive riders, it may be worth the extra cost and is often more affordable than purchasing a separate long-term insurance policy (though it may not have the same coverage). This rider is often priced based on your health at the time of purchase.

3. Guaranteed insurability rider

Life is unpredictable, and your insurance needs may change over time. This rider lets you purchase additional life insurance coverage at certain milestones or dates. Depending on your policy, this could be every five years or after events like getting married, having a baby, or starting a business.

You will have to pay for that increase in coverage, but you won’t have to undergo a medical exam or underwriting (which can be lengthy). This ensures your life insurance coverage accurately reflects your situation, so you don’t have to worry about your insurability in the future.

With this rider, you can lock in lower rates at a younger age, even if your health deteriorates later. This can offer some peace of mind, knowing you have the flexibility to adapt your policy in the future.

4. Disability income rider

Protecting your income is important, especially if you rely on it to support your family and lifestyle. This rider covers your income if you become disabled and cannot work.

You’ll typically receive a percentage of your policy’s face value in income each month (typically ranging from 1% to 2%), which can support you until you reach retirement or pass away. For example, if you had a $500,000 policy, you could receive $5,000 in monthly benefits.

While coverage is much less than what you’d get with a stand-alone disability insurance policy, it’s often more affordable.

A 20-year-old has a 25% chance of becoming disabled before they retire. In many cases, any disability insurance you receive through your employer is not enough to cover you, and you’ll lose coverage if you switch jobs. Having this rider can help bridge that gap.

While having life insurance is an excellent way to prepare for your future financially, it’s also important to identify any other coverage gaps you may have. Riders can help you cover some of those gaps without buying a completely separate policy.

Remember that these riders may not be suitable for everyone, depending on your personal situation and finances. It’s essential also to review any specific restrictions or limits on coverage before you sign up.

By admin

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