For many Canadians life insurance is an essential financial product that protects your loved ones from the financial impact caused in the event of your untimely death.
Life is brittle and no one knows when it is their time to leave this world behind. For many, it is not death that they fear but the impact that their death can have on loved ones and dependents.
In a recent survey, conducted by PolicyMe, it was estimated that nearly 22 million Canadians had some form of life insurance policy (more than half of the Canadian population). The survey also found that 77% of families with dependents had life insurance.
The reason why life insurance is so popular isn’t just because it offers peace of mind, but also because it offers considerable tax benefits and can be customized to fit your unique needs, financial goals, and succession planning objectives.
In this article, we will learn about how you can customize a life insurance policy to suit your specific needs using add-ons or riders as they are referred to in the industry.
Knowing what insurance riders are available to you and how they can impact your policy and premium rates can help you make the most informed decision possible when choosing a life insurance policy either individually, through your employer or for your business.
What Are Insurance Riders? How Do They Work?
An insurance rider is an additional insurance policy that can be tacked on to a standard life insurance policy. You would add riders to your policy in situations where you feel that you need coverage for something specific, or you want to tweak the coverage terms either by extending what is covered by the policy or adding more flexibility to existing terms and conditions.
The best time to add riders to your life insurance policy is during the time of purchase. This is because some riders can’t be added on to a policy once it comes into effect.
The process of adding insurance riders to an existing policy can also be a long and arduous one. Your best bet is to understand what type of insurance riders are available and whether they pertain to you or not. The best way to do this would be to consult with life insurance experts, however, before you do here are some basic types of riders that you should be aware of.
The Various Types Of Life Insurance Riders You Need To Be Aware Of
Many types of insurance riders can be tacked on to a life insurance policy. However, certain types of insurance riders are a lot more common than others as they tend to pertain to a wider audience than others.
Let’s take a look at a few of the more popular life insurance riders that may or may not pertain to your current situation.
Critical Illness Rider
A life insurance policy pays out a death benefit in the event of your death, but what if you get diagnosed with a critical illness that takes away your ability to work or make a living? A critical illness rider can help cover such a situation as you will be paid out a lump sum payment if you are diagnosed with a critical illness that is covered by your policy.
Guaranteed Insurability Rider
The benefit of a guaranteed insurability rider is that it allows you to buy additional coverage without having to undergo the process of underwriting at various dates in the future.
This is a great rider to add if you are buying a life insurance policy while you are still relatively young because as you grow older you may very well require additional coverage for your spouse, children, etc.
By adding this rider you won’t need to prove insurability, so no need for a medical exam or another underwriting process.
Accidental Death Benefit Rider
What if you are in an accident and fortunately it wasn’t fatal but you are now disabled due to losing a limb or a function (such as sight or hearing)? A standard life insurance policy wouldn’t pay out any benefits in this case. However, by adding on an accidental death benefit rider, if you sustain a life-altering injury you will be entitled to a payout.
This type of rider is beneficial for individuals who work dangerous jobs or live a risky lifestyle.
Long-Term Care Rider
This type of insurance rider allows you to receive a portion of your death benefit during your lifetime. The payout can be used to pay for expenses for long-term care such as the cost of hiring a private caregiver, the cost of nursing homes, and other expenses associated with aging. In the event of your death, your beneficiaries will however receive a smaller death benefit depending on how much money has already been taken out.
Waiver of Premium Rider
This type of rider eliminates the need for premium payments in the event of a disability or injury sustained during an accident. The waiver applies to the base life insurance policy as well as any other riders that you have added on. If opting for such a rider make sure that you clearly understand what the waiver is applicable for as they can be quite restrictive.
Choosing The Right Type Of Insurance Rider For Your Policy
There are many other types of insurance riders as well, such as a term rider that adds an extra term of life coverage to your base policy or a child or spousal rider that provides coverage life insurance for you, your spouse, and your children.
Some Canadian families can also choose to add a parent protection rider that offers coverage to their parents as well as their spouse and children.
Another type of popular rider is the return of premiums where you can set up the policy in a way that if you outlive the policy term you will be entitled to all the premium payments you have paid into the policy.
Riders can also help customize the terms of the death benefit. A family income benefit rider, for example, can ensure your family receives monthly income rather than a lump sum payment in the event of your death.
Thus, choosing the right type of insurance rider depends on your needs and priorities. Remember, each rider that you add to your base policy will likely increase the amount of monthly premium that you will have to pay. It is important to find a balance between what coverage you need and what you can afford.
When Considering Opting For Life Insurance Riders Always Consult With The Experts!
Even though you now have a basic understanding of what insurance riders are and their various types it is essential that you still speak to an experienced insurance broker before opting for any type of life insurance policy.
Remember, it is harder to add insurance riders to a policy that is already in effect so it is highly recommended that you think long and hard about what type of insurance policy is best suited to your unique needs before pulling the trigger.
Those of you looking for life insurance experts in Nova Scotia pick up the phone and call McIver Insurance today at 1-902-220-3279 or email [email protected].
We are proudly Halifax’s most trusted insurance brokerage firm and specialize in all types of insurance services.