Supplemental insurance riders today have entered a different phase than in the past, one in which they serve as the “star attraction” of many of the products to which they are attached.
In the annuity world, riders have risen to a key level of importance. For variable annuities, the guaranteed benefit riders are elements that distinguish contracts against the competition.
Optional living benefit riders (guaranteed minimum income benefits, guaranteed minimum accumulation benefits and guaranteed minimum withdrawal benefits) are the engines driving the market right now. To a lesser extent, guaranteed death benefit riders drove the market in the mid- to late 1990s.
In addition, some VA contracts have been built on very flexible, modular chassis, where many of the key product provisions are structured as optional riders. These include liquidity riders, dial-a-surrender charge riders and bonus riders.
On the fixed annuity side, principal guarantees are sometimes handled via a rider structure. Equity-indexed benefits often are built on a declared-rate fixed annuity contract, with the equity-indexed option handled via a separate rider. Optional bailout provisions are available as a rider, sometimes resulting in a lower credited rate on the contract. As with VA riders, the riders for FAs are used to allow for surrender charge-free treatment for surrenders following nursing home confinement or terminal illness.
In the life insurance world, a number of carriers have added secondary death benefit guarantees to universal life and variable universal life contracts to compete in the most popular segment of the permanent market today.
Survivorship life policies historically have relied heavily on riders such as estate preservation riders, policy split options and estate tax repeal riders to focus strongly on the needs of the estate planning market. Accelerated death benefit and guaranteed insurability riders are 2 other important riders that have made individual life contracts more flexible in meeting specific customer needs.