What You Need to Know
- Of course, life agents already talk about all of this.
- If you come at this from another angle, you might not.
- In a crisis, riders could do important things for your clients.
Term life insurance is often viewed as an overly complex product.
In fact, when ReMark surveyed 12,807 consumers around the world about a variety of life and health insurance products, it found that term life insurance was the least understood product.
Let’s break down one of the elements of term life insurance that clients have traditionally viewed as especially confusing: policy riders.
What Is a Rider Anyway?
Most clients should understand the basic concept of term life insurance: You buy coverage for a specific amount of time (or term length).
If a policyholder dies during the policy’s term, their beneficiary receives a lump-sum death benefit payment.
But, while many improvements have been made to streamline how life insurance can be bought, many clients are still unclear about the various associated rider options.
Some clients believe the term “rider” refers to policy exclusions or caveats.
However, of course, in many cases, life insurance riders actually work in the policyholder’s favor.
To clarify things for clients, it’s important that advisors remind them that, generally speaking, a life insurance rider is a feature that is in addition to the life insurance policy.
In other words, riders can help applicants get the customized and personalized coverage they need.
Common, but Confusing, Riders
Once clients understand the concept of a rider, it can be easier for them to sift through the various rider options to see which, if any, might make sense for them.
While each insurer is going to have their own rider offerings and policies, some of the more common riders a client should expect to see include the following:
Accelerated Death Benefit
This type of rider has multiple names, and might be referred to as a living benefit rider or terminal illness benefit rider.
But, regardless of what it’s called, the overarching concept is the same.
This rider is a provision attached to a life insurance policy that allows the policyholder (a client) to access a portion of the life insurance death benefit while they are still living.
The caveat here is that this usually requires a policyholder to have a documented life expectancy of two years or less–hence the name “terminal illness benefit rider.” Additionally, how much of the death benefit a policyholder is able to access varies from policy to policy.