Life Insurance Rider

Life Insurance Rider. Guide to life insurance riders and health insurance riders. Are they worth it?

Insurance Rider Definition

What is an Insurance Rider? Insurance riders are a series of additional features that you can use to complement your insurance policy. Your insurance agent will probably market them to you, but insurance riders add to your premiums, so you should only get those that are absolutely necessary based on your personal circumstances.

Health Insurance Riders

Premium Waiver

Premium waivers will stop premiums under certain circumstances, should you become terminally ill, for example.

Life Insurance Policy Rider: Convertibility

The convertibility rider allows term life insurance policies to be converted to permanent life insurance policies. This is a way to guarantee renewability, and is especially useful should your personal circumstances change. However, this is usually only possible in the first few years of a term

Life Insurance Policy Rider: Accidental death coverage

This offers additional benefits if you die from an accident; this can also include partial disability or dismemberment.

Life Insurance Policy Rider: Renewability

Some life policies guarantee renewability regardless of your health condition; this is especially valuable if you are concerned about your long-term health.

Tax implications

Do also note the tax implications. Since you pay your monthly premiums with after-tax dollars, taxes have already been paid on your life insurance. Thus, there would be no income tax charged on the insurance benefits.

However, with regards to estate taxes, insurance proceeds would be taxable. The only way to prevent this is to first transfer the insurance policy to a special insurance trust.

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