Rider: Definition, How Riders Work, Types, Cost, and Example
What Is a Rider?
A rider is a provision in an insurance policy that adds benefits or amends terms, offering additional coverage.
Typically low-cost due to minimal underwriting.
Also known as an insurance endorsement.
Applies to life, home, auto, and rental insurance policies.
Key Takeaways
Tailors insurance coverage to meet policyholder's needs.
Comes at an extra cost in addition to premiums.
Available in forms like long-term care, term conversion, waiver of premiums, and exclusionary riders.
Cannot always be added after policy initiation.
Understanding a Rider
Riders help tailor insurance products to address specific needs not covered by standard policies.
Benefits include increased savings and the option for additional coverage at a later date.
Example: An accelerated death benefit rider provides cash benefits to a terminally ill person while living, reducing the death benefit for beneficiaries.
Important to assess the cost vs. need and avoid duplicate coverage.
Types of Riders
Long-Term Care Rider
Available with cash value insurance products like universal or whole life insurance.
Funds reduce the death benefit; unused riders save costs over stand-alone policies.
Term Conversion Rider
Allows conversion from term to permanent life insurance without a medical exam.
Useful for young parents to ensure future coverage.
Waiver of Premium Riders
Waives premium payments if the insured becomes critically ill, disabled, or injured.
Availability may be limited by state, age, or health requirements.
Exclusionary Riders
Restrict coverage for specific conditions/events.
Mainly in individual health insurance; prohibited for children and in healthcare insurance since 2014 by ACA.
Example of a Rider
Homeowners insurance typically covers structural damage, but with limits.
A scheduled personal property rider can extend coverage on valuable items like jewelry beyond standard limits.
Fast Fact
Standalone policies often offer more coverage than riders; consult an expert before relying on a rider.
Rider Insurance FAQs
What Is a Rider in Insurance?
An add-on to a basic policy providing additional benefits tailored to the insured's needs.
Does a Rider Cost More Money?
Added to a policy for an additional fee.
What Are the Benefits of a Rider?
Tailors coverage to specific needs; may provide cheaper or tax-deferred benefits.
What Are Home Owners Insurance Riders?
Include scheduled personal property, water backup, building code, business property, and identity theft restoration coverage.
How Can I Drop an Insurance Rider?
Most insurers allow removal of a rider via a form.