Do Life Insurance Riders Affect the Death Benefit Payment?
Life insurance pays a predetermined amount (known as a “death benefit”) when the insured person passes away. Generally, the death benefit on a life insurance policy is set when it’s purchased and never changes. However there are a few optional clauses, or “riders,” that alter the way benefit payments are handled. These might raise the policy’s overall value, or change the payment structure to better support the insured’s beneficiaries.
Need more info on riders in general? Start here for an overview of what life insurance riders are, how they work, and the different options available to you.
Examples of Death Benefit Riders
Accidental death or “double indemnity” riders
Accidental death or “double indemnity” riders provide an additional death benefit if the insured person’s death is due to an accidental cause. The second death benefit paid by an accidental death rider is often equal to the policy’s face value — so it effectively doubles the amount paid to the insured person’s beneficiaries. (Thus, the name “double indemnity.”)
“Accidental death” will be clearly defined by any policy that includes an accidental death benefit rider. Situations that qualify can include things like work-related accidents (a good choice for people with hazardous occupations) or a fatal car accident. Causes of death that are generally excluded by an accidental death rider include things like war, illegal activities, or dangerous hobbies (like skydiving or mountain climbing).
Cost of living riders
Adding a cost of living rider means the insurer will increase your death benefit each year, or every few years, to keep pace with inflation. What does that mean for you? If you were to pass away while covered, you wouldn’t have to worry about the death benefit not being adequate to cover living costs that have increased over the years. It’s worth noting, though, that your premiums might also go up each time your insurer increases the policy’s overall value. (A bigger death benefit almost always means higher rates.)
Family income benefit riders
A family income benefit rider changes the way the death benefit is paid out to a policyholder’s beneficiaries. Instead of handing down the death benefit as a one-time, lump sum payment — which is the norm — family income riders mean the insurer will pay it in smaller monthly installments. This ensures that the life insurance policy will provide steady, longer-lasting financial support to the insured’s family that can help supplement their missing income.
- Before you can think about adding riders, you’ll have to choose which kind of basic life insurance policy best suits your needs. Start with this comparison of term life versus whole life insurance for an overview of your two main options.
- If you’re fully armed with coverage choices and ready to start shopping, check out our review of the best life insurance companies for in-depth information of the market’s top providers.