Many riders are now common in the life insurance industry. Others are poised for greater use, depending on market conditions. We’ll review both types here and see how riders that achieve the greatest popularity tend to expand benefits with each iteration.
Some life insurance riders that have become common include: level term riders; accidental death benefit riders; waiver of premium riders; and guaranteed insurability riders. In recent years, the accelerated death benefit rider and the return of premium rider have become very popular, too. The latter two illustrate how riders keep expanding to meet more customer needs.
Accelerated death benefit rider: The accelerated death benefit rider has evolved over the years and is now offered on most life insurance contracts. The rider benefit started as a lien on the death benefit for insureds who were terminally ill. Usually, the insurance company required a physician statement that verified the insured’s life expectancy was less than 12 months.
Later, this rider expanded to include paying benefits when the insured is diagnosed with specific dread diseases, such as cancer or multiple sclerosis. Some developers expanded the rider even further, to include a benefit payment if the insured enters a long term care facility.
This rider’s benefit payment structure expanded, as well. Initially, the benefits only included a portion of the life policy’s death benefit–for example, the original riders commonly paid out 2% of the death benefit per month for a maximum of 36 months. But, over time, carriers started increasing the maximum benefits, so the payout would go up to 100% of the death benefit–and beyond.
Today, some insurers are offering riders in addition to the accelerated death benefit riders that restore the initial death benefit or extend the LTC benefits to twice the original maximum benefit period. A more recent movement has been to include accelerated benefit riders on all types of insurance products. (Initially, most such riders were added to term or universal life policies, but now they also are added to whole life policies.)
Return of premium rider: While this rider has been around a long time on mortgage life insurance products, the return of premium rider recently has hit the mainstream term marketplace where it is very popular. Most carriers find that they are exceeding their sales goals on the rider. In fact, one company sells the return of premium rider on 25% of its term sales.